Photo by Gus Ruballo on Unsplash
The White House fact sheet on the Inflation Reduction Act identifies four main goals: create clean energy jobs, make the tax code fairer, revitalize American manufacturing and lower health care costs. As with every 'variety-pack' bill that passes, it will take months, if not years, to operationalize the goals and promises contained within it. That said, there are some immediate benefits for homeowners due to a few existing programs being extended and/or expanded. Highlights for homeowners include:
1. Expanding and extending tax credits for residential clean energy projects
The Residential Clean Energy Credit is being extended and increased. This credit program was set to dwindle from 30% to 22% before ending in 2023. However, the Inflation Reduction Act changed that. Now homeowners can get a 30% non-refundable tax credit for installing and using any of the following to produce electricity, heat water, or regulate the temperature in their home: solar electric panels, solar hot water, fuel cells, small wind energy, geothermal heat pumps, and biomass fuel. The program will continue like this through 2032 before beginning to phase out. This increases the credit to 30% for homeowners making these updates this calendar year and allows folks to plan for clean energy install and upgrade projects over the coming decade.
Learn more about the federal solar tax credit>>
2. Increasing and continuing rebates for energy-efficient appliances and improvements
The Credit For Energy Efficient Home Modifications, as its name implies, is focused on supporting homeowners in making their property more energy efficient. As outlined by Rewiring America, a non-profit focused on electrification as part of our clean energy solution, "Qualified electrification projects include heat pump HVAC systems, heat pump water heaters, electric stoves and cooktops, heat pump clothes dryers, and enabling measures such as upgrading circuit panels, insulation, air sealing, ventilation, and wiring." In addition, approved appliances will be point-of-sale rebates meaning there would be off-the-top discounts when a household makes the purchase.
Project installation costs are also covered for households earning less than 80% of the area median income (AMI). Updates to this program do not go into effect until 2023. The program will be administered at the state level. We should all be prepared for some hiccups in the rollout, including handoffs between the federal Treasury Department and individual states and the ability of manufacturers of eligible equipment to keep up with increased demand.
Map of Portland-Metro area median income(s) using census data>>
3. Revival and expansion of the Non-business Energy Property Credit program
The Nonbusiness Energy Property Credit Program that expired at the end of 2021 has been revived by the Inflation Reduction Act. None of the tweaks to the program will be implemented until 2023, but for all of 2022, the program's original parameters and percentages will apply. The benefits include tax credits for various energy efficiency upgrades (energy-efficient appliances and improvements to insulation and exterior doors, windows, and skylights) to residential properties. Note that only primary residences are eligible for this program.
Learn about Nonbusiness Energy Property Credits available in 2022>>
Note that this is also the place to keep watch for 2023 program updates!