In August, the Inflation Reduction Act (IRA) passed Congress and was signed into law. Within the legislation is $369 billion allocated for energy security and climate change – the largest investment in fighting climate change ever passed by the US.
In this post, we break down the 730 page document for you, highlighting the major pieces that impact consumers. And if you just want to jump to the numbers, our friends at Rewiring America built this handy calculator so you can easily see how much you can save.
There are two main types of incentives–tax credits and consumer rebates. Most of what we outline below are tax credits and they are either already available or will be starting January 1, 2023. There are also direct to consumer rebates for income qualified households that will be allocated by state energy offices sometime in 2023, so we will keep you updated on those.
Here are the key incentive categories:
Residential Solar and Batteries
The Residential Clean Energy credit, or 25D, allows households installing solar and batteries to deduct 30 percent of the cost of each project from their taxes. That’s 30 percent for solar and 30 percent for batteries. It also includes a 30 percent deduction for an electrical panel upgrade if needed with the service, so it would be a good time to get your whole home electrification ready.
The Clean Vehicle credit, or 30D, gives a $7,500 credit for new electric vehicles and a $4,000 credit for used electric vehicles.
A few qualifications here: the tax credit for new vehicles are available to single individuals with modified adjusted gross income less than $150,000. The cap is $225,000 for heads of household and $300,000 for married couples who file a joint tax return. These income caps are 50% lower for used EVs. There are also certain rules around which cars qualify. You can see a list of qualifying vehicles here.
Electric Home Upgrades and Insulation
The Energy Efficient Home Improvement credit, or 25C, allows households to deduct from their taxes up to 30 percent of the cost of upgrades to their homes, including installing heat pumps, heat pump water heaters, insulation, energy audits, and upgrading their breaker boxes to accommodate additional electric load.
These tax credits are capped at $600 per project, up to $1,200 per year, with the exception of heat pumps and heat pump water heaters which are capped at $2,000 per year.
There is also another program called The High Efficiency Electric Home Rebate Act (HEEHRA) that includes $4.5 billion in direct rebates for low- and moderate-income households that install new, efficient electric appliances. This program will be administered by state energy offices so we will share more information next year as it rolls out.
Geothermal Heat Pump Heating
The Residential Clean Energy, or 25D, provides households an uncapped 30 percent tax credit for a geothermal heating installation. Geothermal or ‘ground-source’ heat pumps capture and move heat via pipes that move heat between the earth and your home. They can be particularly effective in cold climates.
As you read above, there is a lot of potential to save money while improving your home and reducing emissions, but it can be confusing to figure out where to start. What should I replace first? How do I get the tax credit? When? Can I use financing?
That’s where we come in to help. When your team signs up for Canopy, we ask each user questions about their current setup and preferences and then provide personalized recommendations so you know where to start.
Within the product we provide information on things like financing options and product types so you can make informed decisions. There is also a concierge service so we can help you answer additional questions, navigate tax credits, find resources, or chat about recent baking projects. Seriously. We love questions (and baking!) and are here to help.
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