– Bill O., Dewey, OK
Joe Biden’s 2022 Inflation Reduction Act created $8.8 billion in tax credits and rebates to help lower- and middle-income homeowners contribute to the country’s emission reduction goals. As with prior housing policy, the act defines lower- and middleincome Americans as those making 150 percent or less of their Area Median Income, or the midpoint of their local area’s income distribution. The bulk of these incentives come from federal tax credits which, like the act’s statebased rebates, are available through September 2031, and can be applied retroactively to purchases and installations after August 2022.
The Residential Clean Energy Tax Credit covers up to 30 percent of installation costs for alternative energy sources including solar panels, small wind turbines, geothermal heat pumps and battery storage systems. The $3,200 Energy Efficient Home Improvement Credit, on the other hand, covers upgrades to existing energy sources. The credit can be applied with a cap of $1,200 to new windows and skylights (up to $600), new doors (up to $500), and improvements to insulation (up to 30 percent).
Out of the 23 total states that have applied for rebate program funding, eight have recently been approved: Arizona, California, Hawaii, Indiana, Maine, New Mexico, Rhode Island and Washington. Two more, New York and Wisconsin, have already begun distribution. The Department of Energy expects that several states will join them later in 2024 beginning with the Home Efficiency Rebate Program (HOMES), which will offer rebates of up to $8,000 and $4,000 respectively for low- and middle-income households that can cut energy usage by 35 percent or more.
The Home Electrification and Appliance Rebate (HEAR) boasts a cap of $14,000 in rebates per household and is expected to follow implementation of HOMES. Under HEAR, lowand middle-income homeowners can expect 50-100 percent point of sale coverage on several appliances including up to $8,000 for electric heat pumps; $1,600 for insulation and air sealing; $2,500 for electric wiring; and $840 for electric stoves, ovens and heat pump clothes dryers.
Energy upgrades have the potential to save homeowners money far beyond installation. For example, more efficient homes can mean reduced energy bills. Furthermore, green homes can qualify for benefits such as a $5,000 tax credit if they meet the Department of Energy Zero Energy Ready Home (ZERH) standards. A qualified home energy auditor can help homeowners looking to cash in on the myriads of incentives determine which upgrades fit best with their homes and budgets.
CONTACTS: IRS.Gov https://www.irs.gov/credits-and-deductions-under-theinflation-reduction-act-of-2022; Tax Form 5695 for Home Efficiency Credits (IRS): https://www.irs.gov/pub/irs-pdf/f5695.pdf; Energy Star https://www.energystar.gov/partner_resources/residential_new/program_reqs.
