Washington’s Bi-partisan Inflation Reduction Act (IRA)
Let it work for you!
While the often caustic rhetoric of the midterm elections was getting into gear in late summer, Washington legislators actually came together and passed the Inflation Reduction Act (IRA) on August 7th inspiring The Atlantic to call the date “probably the best day for climate action in American political history.” Now effective since January 1, 2023, there are numerous opportunities to claim federal tax credits (dollar for dollar reductions in your tax bill) while simultaneously making a positive environmental impact. If you’re looking to buy an EV or looking to do some home upgrades these are a must review. We highlight some of the energy-related benefits here.
Considering an EV?
For electric vehicle purchasers, the tax credits can be meaningful (as high as $7,500 per vehicle) but there are also limitations too numerous to cover in this piece including purchaser income limitations. But, it is absolutely worth reading the requirements to get this significant tax credit! We urge you to consult the Department of Energy site found here for specific details.
Home Energy Efficiency
For homeowners, many expiring credits were extended and enhanced, and new credits were added. You can reduce your power, heating, and cooling expenses for years to come and save a lot of money on the upfront equipment and installation – greatly reducing the payback timeframe.
For each of 10 years beginning in 2023 and going through 2032, households can claim $1,200 in federal tax credits each year (a total of $12,000!) for certain efficiency upgrades. This replaces the $500 lifetime cap in tax credits that was put in effect in 2006.
On top of those great credits above, solar tax credits of 30% for materials and installation are higher than the expiring solar credits and are now protected for 10 years. In addition to the $1,200 annual number, homeowners can also qualify for separately up to $2,000 per installation for heat pumps, biomass stoves and heat pump water heaters . There’s never been a better time to make your home more energy efficient!
Read the fine print
Caveat….make sure that you confirm with your contractor prior to purchasing any equipment that it meets the specifications needed for the rebates. Many products need to exceed current Energy Star ratings to qualify for the rebate.
Additional Incentives Based on Income
If your household income is less than 80% of your area’s median income, your rebates can cover up to 100% of your project costs!
Home Energy Upgrades Qualifying for Federal Tax Credits through 2032:
|NOT LIMITED: (30% of materials plus installation)|
Solar water heating
Geothermal Heat Pumps
|$2,000 MAX PER INSTALLATION: (30% of materials plus installation)
Can be claimed in ADDITION to those subject to $1,200 below
Electric or natural gas Heat Pump
Electric or natural gas Heat Pump Water Heater
|$1,200 ANNUAL TOTAL|
|Windows/Skylights – up to $600 per window
Exterior Doors – up to $250 per door (max 2 doors/year)
Home Energy Audit – up to $150
Central air conditioners
Electric panels and certain related equipment
Natural gas, propane, or oil water heaters
Natural gas, propane, or oil furnaces or hot water boilers
Don’t ignore state incentives:
Many states have tax credits in addition to those listed here. Consult the DSIRE website to find incentives that can be paired with many of the federal incentives.
Federal Tax Credits for Energy Efficiency (keep checking site for updates)
The I.R.A. can be a gamechanger. It can reduce your upfront costs while also saving you money over the long-term. The right financial advisor can help you think about this program and how it may work for you and your budget. If you’re ready to talk to a financial advisor that specializes in environmental sustainability, set up a call with us today. We’re here to help you make better financial decisions and build a path forward.