How the inflation act can help
President Joe Biden signed the Inflation Reduction Act of 2022 (IRA) into law on Aug.
16, calling it “the most aggressive action ever” to confront the climate crisis and strengthen the nation’s economic and energy security.
But for homeowners, the IRA promises a welcome boost for residential energy upgrades. As part of the bill’s focus on energy security and climate change investment, households will get tax credits to help offset home improvements that lower energy costs while reducing carbon emissions by up to 40% by 2030. Here’s a breakdown of the IRA’s most significant provisions for homeowners.
High-Efficiency Electric Home Rebate Act
The High-Efficiency Electric Home Rebate Act (HEEHRA) lets homeowners take advantage of rebates for certain electrification projects. Households with a median income level under 80% of the area median income can get up to 100% of their project covered, up to $14,000, and households earning between 80% and 150% of the area median income can recoup 50% of the cost, also up to $14,000. HEEHRA rebates cover both installation and material costs. Projects include:
Heat pump HVAC systems
Electric stoves and cooktops
Heat pump water heaters
Heat pump clothes dryers
Circuit panel upgrades Insulation upgrades Ventilation upgrades Wiring upgrades
Energy efficiency credits
The IRA’s Energy Efficient Home Improvement Credit renames a nonbusiness energy property tax credit that expired at the end of 2021 and extends it through 2032. But it’s gotten a boost. The provision now lets you claim credit for 30% (up from 10%) of what you pay to install upgraded heat pumps, insulation, breaker boxes, biomass stoves and other energy-saving systems that meet efficiency criteria. There is an annual cap, however, of $2,000, with lower caps for certain specific items such as doors and windows.
The New Energy Efficient Home credit incentivizes developers to build greener homes by offering a credit of up to $5,000. To qualify, builders must construct homes that qualify for the Department of Energy’s Zero Energy Ready Homes Standard.
Homeowners can cut 30% of solar costs from their federal taxes under the Residential Clean Energy Credit, which runs through 2032. The credit goes toward the cost of solar panels and other solar products for the home. One major perk: There’s no cap on how much you can spend.
Drivers considering going electric or installing an electric car charging station in their home should take advantage of the IRA’s Clean Vehicle credit. Under the program, those who buy electric or plug-in hybrid cars or trucks can get a $7,500 tax credit for new vehicles and $4,000 for used ones.
Can I start accessing benefits now?
Consumers can start to reap some of the IRA’s energy-related home improvement benefits immediately. The Energy Efficient Home Improvement Credit goes into effect this year, as does the Residential Clean Energy Credit.
Also, the electric vehicle tax credit goes into effect immediately. But you won’t see the actual financial benefit until you file your 2022 tax return next year.