Washington’s Bi-partisan Inflation Reduction Act (IRA)

Jan 22, 2023

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.

eam-iract-2023

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)

  • Rooftop Solar
  • Battery Storage
  • 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

  • Biomass Stove
  • 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
  • Insulation
  • 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.

LEARN MORE:

White House IRA Page »

Federal Tax Credits for Energy Efficiency »  (keep checking site for updates)

The I.R.A. can be a game-changer. 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 who 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.

— More —

Irrevocable Life Insurance Trusts: An Estate Planning Tool

Irrevocable Life Insurance Trusts: An Estate Planning Tool

Irrevocable Life Insurance Trusts (ILITs) are powerful tools for estate planning. There are two key features that make up an ILIT: a Life Insurance Policy and an irrevocable trust. By combining these two elements you may gain more benefits than having life insurance...

The Presidential Election and the Stock Market

The Presidential Election and the Stock Market

Presidential elections stir up a lot of excitement and anxiety when it comes to the stock market. Many investors often wonder how the outcome of the election will affect their portfolios. This can lead to speculation and an increase in short-term trading. But how does...

The Mega Backdoor Roth – Tax Free Growth Tax Free Retirement

The Mega Backdoor Roth – Tax Free Growth Tax Free Retirement

The Roth IRA, allowing individuals to save after-tax dollars and then grow those investments completely tax-free with no requirement to take distributions, were a welcome addition to the retirement savings landscape in 1998.  However, many people are locked out of...

I Bonds – Time to Revisit That Investment?

I Bonds – Time to Revisit That Investment?

I Bonds where all the rage not too long ago. I Bonds are a type of U.S. savings bond that offer investment safety with a feature designed to protect against inflation. When inflation was heating up in 2021/2022, there came a point when the interest rate on an I Bond...

SEP IRA vs. Solo 401(k): Retirement Savings for the Self-Employed

SEP IRA vs. Solo 401(k): Retirement Savings for the Self-Employed

Being self-employed is never easy. Thinking about your retirement and associated retirement accounts is often an afterthought. But contributing to a retirement account is still critical. Two popular (non-exhaustive) options that self-employed people can use to access...

To S-Corp or Not to S-Corp

To S-Corp or Not to S-Corp

When starting a business, owners often face the dilemma of which corporate structure to use. For smaller businesses, particularly those with only a single owner, the first three options that come to mind are operating as a sole proprietor, a limited liability company...

Climate On The World Stage

Climate On The World Stage

In January, world economic leaders gather in Davos, Switzerland for a 5-day meeting convened by the not-for-profit World Economic Forum (“the Forum”) to discuss global risks and opportunities as well as forge connections for cooperation on issues that impact the...

Year-end Tax Strategies

Year-end Tax Strategies

Before your brain goes full holiday-mode, as the year draws to a close, it’s time to consider some savvy end-of-year tax strategies. While it’s always better to plan throughout the year, here are two such strategies: tax loss harvesting and tax bracket stacking, which...

Book an Introductory Meeting Today

Start your ESG/SRI journey. Schedule a no-obligation, 15-minute complimentary call to learn more about our approach and how it may fit with your goals.

Top