Earlier this week, U.S. President Joe Biden signed into law a megaclimate bill, the Inflation Reduction Act (IRA). Electrek speaks with Baker Newman Noyes, JD, CPA Senior Tax Practice Manager Dan Guyer about how homeowners can claim tax credits and rebates in their bid to achieve energy efficiency and cut their energy bills.
Changes to the former Nonprofit Energy Property Loan (now renamed Home Energy Improvement Loan) will take effect January 1, 2023.
The old cost of the loan is equal to 10% of the cost of installing insulation, windows and doors, roofing and other energy efficient modifications. The old $500 lifetime limit is still in effect until the end of 2022.
Beginning in 2023, the $1,200 annual tax credit limit will replace the old $500 lifetime limit. The tax credit will be equal to 30% of the cost of all repairs in the house for the year. It has also expanded to include biomass stoves and boilers, electrical panels and home energy checks, among others.
Starting in 2023, the annual limits for certain types of allowable changes have been improved. For example, $250 for exterior doors or $500 for all exterior doors; $600 for exterior windows and skylights; $2,000 for heat pumps and heat pump water heaters for homeowners not eligible for discounts due to higher household income (see below). (The last $2,000 is an exception to the $1,200 annual limit.)
The Residential Clean Energy Loan, which has been extended until 2034, was formerly known as the Residential Energy Efficient Real Estate Loan.
From 2022 to 2032, the credit line for the installation of clean residential energy sources such as solar, wind or geothermal has been increased from 26% to 30%. It then drops to 26% and 22% in 2033 and 2034.
In terms of solar credit, the home loan and business investment tax credit will return to 30% for solar installations put into operation anytime after January 1, 2022.
Guyer went on to explain how homeowners can receive tax credits for the Home Energy Improvement Improvement Loan and the IRA-sponsored Home Clean Energy Loan:
The mechanism for obtaining this loan in 2022 and 2023 appears to be the same as in the past – the loan is requested on the buyer’s personal income tax return. Buyers are not required to submit specific documents on their tax returns, but must keep the documents as part of their tax returns to prove they purchased the eligible property in the event of an IRS audit.
Suppliers should be able to provide such documents to buyers. In 2024 and beyond, manufacturers will be required to create a specific product identification number for each eligible product they sell, which buyers will need to list on their tax returns in order to receive credit.
Update August 20th: Some readers have asked for clarification on battery capacity, and it’s absolutely true. Here’s the inside story: Before the IRA, there was a 26% tax credit for storing batteries that were solar-only charged on site. Under the IRA, it follows the same schedule as solar, offering a 30% tax credit starting in 2023 (see above). But the biggest change is that from 2023, the tax credit is now available for batteries with a capacity of at least 3 kWh, regardless of the energy source.
The $4.28 billion IRA High Efficiency Electric Homes Rebate Program provides upfront rebates of up to $8,000 for the installation of heat pumps that can heat and cool a home. It also offers discounts of up to $1,750 on heat pump water heaters.
There are also discounts of up to $840 to offset the cost of a heat pump dryer or electric stove, including induction.
If a home needs to upgrade an electrical panel to support a new device, rebates of up to $4,000 are available to do so. There are also discounts up to $2,500 on wire upgrades.
Save up to $1,600 on one of the most cost effective and fastest ways to make your home more energy efficient – insulating and sealing.
Homeowners can receive up to $14,000 in total in rebate. To be eligible, a household’s income cannot exceed 150% of the area’s median income as calculated by the Department of Housing and Urban Development. (This is Fannie Mae’s regional median income finder to see what your cap is.) Depending on the account itself, the discount starts after December 31, 2022.
The Inflation Reduction Act does not specify how the rebate will be administered—details here are left to the Treasury Department to issue general guidance and then grant grants to state governments, who are responsible for actually implementing the program and issuing the rebate.
The goal here is to provide a discount to qualified buyers at the point of sale, so it will be a direct discount on the purchase price, not a tax credit.
Given that much remains to be done at the federal and state levels to develop more detailed rules and establish the necessary administrative procedures, it is unlikely that this rebate program will be launched sometime in 2023, along with the specifics of each state’s plan. , may be different.
The rebate program will run until September 30, 2031, and the Home Energy Improvement Loan will run until 2032.
Learn Solar is a free service that connects you to the best solar installers in your area for a personalized solar energy estimate. Tesla now offers price comparison, so it’s important to buy the best deal. Click here to learn more and get a quote. – *to advertise.
Electrek Green Energy Briefing: Daily technical, financial and political review/analysis of important green energy news
Michelle Lewis is a writer and editor for Electrek and an editor for DroneDJ, 9to5Mac and 9to5Google. She lives at the White River Crossing in Vermont. She previously worked for Fast Company, The Guardian, News Deeply, Time and more. Send Michelle a message on Twitter or Michelle@9to5mac.com. Check out her personal blog.
Post time: Aug-22-2022