HOW HOUSEHOLDS CAN SAVE THOUSANDS & FIGHT CLIMATE CHANGE
Earth Day Initiative, a nonprofit organization dedicated to promoting environmental awareness, has recently unveiled its Climate Action Guide to assist consumers in navigating available resources and taking concrete steps toward a greener future. The Inflation Reduction Act (IRA), passed in 2022, is the largest climate investment in America’s history, with projected goals to cut greenhouse gas emissions by 40% by 2030. While the legislation makes sweeping investments in agriculture, clean energy, manufacturing, and transportation for the average citizen, this legislation provides a variety of opportunities to save money while investing in renewable technologies for home and vehicle upgrades. For a more detailed exploration, check out the guide at earthdayinitiative.org.
Taxpayers can use a handful of tax incentives to reduce their yearly tax burden. The Energy Efficient Home Improvement Tax credit offers incentives for a range of home upgrades including, but not limited to, insulation, home energy audits, heat pumps, and upgrading to energy-efficient doors and windows. Under this tax credit, eligible consumers can claim 30% of the project cost up to a combined $3,200 annual cap for all credits. The Residential Clean Energy Credit includes incentives for installing solar panels, geothermal heat pumps, wind turbines, and solar water heaters. These credits also allow consumers to claim 30% of the project cost. However, these upgrades do not have an annual yearly cap.
It’s important to note that these tax credits are all non-refundable, meaning the credit cannot be used to create or increase your tax refund. They reduce the amount you owe in taxes. To claim these credits, you will need to include the appropriate forms and documentation with your tax return. Some of the credits allow any unused portion to be carried over from year to year, and all of the credits will be available until 2032. Jennifer Morris, Campaign Manager of Earth Day Initiative, explains, “It can be helpful to first get a home audit from a professional to prioritize the upgrades you want to make. Focusing on insulation and energy-efficient windows before HVAC upgrades, for instance, ensures energy isn’t wasted.”
She goes on to say, “Navigating the complexities of these incentives can be daunting, which is the reason we created this comprehensive guide. Our resources offer detailed insights into each credit and provide a roadmap for optimizing their combined benefits. We really wanted to make this information more accessible and easy for people to implement.” The Climate Action Guide provided by Earth Day Initiative includes a breakdown of each incentive for home improvements and electric vehicles and infographics to understand how the credits work and can be combined. There is also a calculator, courtesy of ReWiring America, where anyone can enter their zip code and income information and see which incentives they may qualify for. Additionally, there is a Speakers Bureau, which offers opportunities to bring experts into your community or join virtual presentations on climate topics.
In addition to the tax credits, state governments will also implement rebate programs, giving homeowners rebates for modeled energy savings on their homes. Homes with projected energy savings of 35% or more could receive up to $4,000 or 50% of project costs, with lesser rebate amounts available for projected energy savings between 15%-34%. The savings for people in low-income households (less than 80% AMI) could be doubled, up to $8000 or 80% of project costs, depending on the amount of energy savings. All income brackets will be eligible to receive these rebates. However, the exact details of how to claim them or when they will be made available are still up in the air. The programs will be administered at the state level, so the timing will vary by state.
Taxpayers in the low or moderate income bracket, less than 150% AMI, who install energy-saving appliances or make electrification upgrades, will be eligible for another set of rebates. These will be applied at point of sale and the amount will vary depending on the person’s income bracket. Items that qualify for the rebate include electric heat pump water heaters (max $1750), heat pumps (max $8000), electric stoves (max $840), electric clothes dryers (max $840), replacing an electrical panel (max $4000) or wiring (max $2500) and insulation, air sealing and ventilation (max $1600). There is a $14,000 cap per household for these rebates. This program is also forthcoming and will be administered on a statewide level.
Another way taxpayers can switch to renewable energy while saving some cash is to switch to clean vehicles. Purchasers of qualified vehicles meeting the income requirements are eligible for a credit of up to $7,500 for new vehicles and $4,000 for a used vehicle. These differ from the home improvement credits because they can be applied at the time of purchase. Make sure to check your eligibility and work with a dealership to find qualifying vehicles. Individuals who install charging stations for electric vehicles in either low-income or nonurban census tracts can also claim a credit of 30% of the total cost, up to $1,000.
With substantial financial incentives up for grabs, the Inflation Reduction Act allows individuals of all income levels to reduce energy expenses and contribute to the fight against climate change. For detailed information t eligibility restrictions, can check Earth Day e’s Climate Guide at itiative.org.