Tax rebates and credits for energy efficient home upgrades are a big theme in the new Inflation Reduction Act. Homeowners exploring renewable energy solutions will find incentives for just about any kind of eco-friendly home improvements.
Among its many lofty goals, senate democrats say the expansive legislation is meant to reduce the country's carbon emissions 40% by 2030. That goal is achieved by offering homeowners substantial rebates, tax credits and the promise of lowering energy bills by $500-$1,000 when they purchase and install energy efficient products.
Eligible products vary from insulation and HVAC systems to rooftop solar and home appliances, and the incentives range from a couple hundred dollars to several thousands. In many cases, these federal incentives could easily offset 50% or more of the products and installation costs when coupled with additional tax credits and local utility rebates.
What parts of the bill matter for homeowners?
The Inflation Reduction Act in its entirety is a massive piece of legislation, addressing record inflation, domestic energy production, prescription drug prices and more. But homeowners should pay particular attention to the 3 elements that matter when in comes to energy efficient home upgrades.
#1 The Energy Efficient Home Improvement Credit
The credit formerly known as the Nonbusiness Energy Property Credit from 2021, has a better name and a bigger offer. The Energy Efficient Home Improvement Credit has been extended through 2032, offering 30% of costs (up to $1,200 annually) on products including but not limited to:
Home energy audits
Windows, doors and skylights
Better still, there are no longer any lifetime limits tied to the credit, meaning homeowners can space eligible upgrades out over the next decade and claim the maximum $1,200 each year. The previous credit ranged from 10-100% of costs but was handicapped by its measly $500 lifetime limit.
#2 The Residential Clean Energy Credit
Another "formerly known as" credit that homeowners should get to know offers another 30% on solar energy products and upgrades. The Residential Energy Efficient Property Credit, or the "Solar Tax Credit" was set to expire in 2024, but the new Residential Clean Energy Credit is now available until 2034 and offers a sweeter deal. In its previous form, this tiered credit only offered a 26% tax credit on solar products, with a 2% decrease scheduled at the end of the year. The extended credit is good for 30% of total costs on solar upgrades including but not limited to:
Home batteries and electric vehicle chargers
Homeowners have until the end of 2032 before the credit dips back to 26% in 2033, then down to 22% in 2034 when the credit is set to expire.
#3 The High-Efficiency Electric Home Rebate
The new kid on the home energy rebate block is the High-Efficiency Electric Home Rebate. Available to households with an annual income less than 150% of the area's median income, this rebate applies to energy efficient upgrades including but not limited to:
Cooktops and heat pump dryers
Electric water heaters
Home ventilation and insulation
Electric panel upgrades
The High-Efficiency Electric Home Rebate does have a limit of 50% of the total cost of the project, and a lifetime total of $14,000 per household until September 2031.
The availability of home energy rebates has grown exponentially over the past several years, but with a mixture of federal, local, municipal and even local utility rebates available it can get pretty confusing what all homeowners can get. Ask your prospective contracting company about any and all available rebates your project may qualify for before you schedule any work to begin. Combining all the rebates and credits you can is an easy way to offset a tremendous amount of the total cost of the project before your wallet is even involved.
In terms of benefits, the Inflation Reduction Act is a boon for homeowners interested in lowering energy costs and increasing home value and efficiency. These incentives will make energy efficient products accessible to homeowners in any economic class more than ever before, and could go a long way in making smarter home solutions the standard for years to come.
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