The Inflation Reduction Act included environmental incentives that went into effect on January 1. The bill includes tax credits for electric vehicles, solar panels and home energy upgrades. Americans could save thousands of dollars by making their homes more efficient while claiming tax credits. Something is loading.
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The Cut Inflation Act — Democrats’ big tax, climate and health care bill passed by Congress last year — includes a slew of environmental initiatives that many Americans can enjoy back home. .
These initiatives include ten years of consumer tax credits to make homes more sustainable and energy efficient, as well as incentives for the purchase of electric or hybrid vehicles. Some measures went into effect when President Joe Biden signed the law into law in August, but others took effect or were extended on January 1.
Here are some of the bill’s green initiatives and tax breaks that Americans can start using at home today.
Households who equip their homes with rooftop solar panels can benefit from a tax credit covering 30% of the installation cost, reducing the cost of installing solar energy by several thousand dollars. To use the tax credit, you can install solar energy on your property, for example, by hiring a licensed solar installer certified by an organization like the North American Board of Certified Energy Practitioners.
Thirty percent of everything you spend on installation — including labor, solar panels, energy storage devices, and other equipment — can be claimed as a tax credit federal. According to the Center for Sustainable Energy, the average size of a residential solar system is 5 kW, which costs about $20,000. At this price, the claimable tax credit would be $6,000.
The solar energy tax credit is expected to last until 2032, when it will decline and then expire in 2035 unless Congress renews it.
Insulation and weatherization
There are several ways to make a home more energy efficient while saving money on heating and cooling, including sealing windows and doors, upgrading insulation, and replacing your gas furnace with an electric heat pump. The first step is to have your home energy audited to determine what it needs.
A home energy audit – also known as a home energy assessment – involves a professional assessing how much energy your home uses and areas of inefficiency that can be improved. The auditor will then recommend further steps. An appraisal can cost between $100 and $600, depending on the size and location of your home. Alternatively, you can perform an energy assessment of your home on your own.
Since January 1, a household can claim a tax credit of up to $150 for an energy audit carried out by a professional inspector. Any updates made after the appraisal, such as adding insulation or efficient windows and doors, can be claimed as a tax credit of up to 30% of the total cost, up to $1,200 .
Replace your gas furnace with a heat pump
More than 10% of carbon emissions in the United States come from gas and oil used for heating and cooking, according to RMI. But heat pumps, which transfer cold air from one place to another, can be up to four times more efficient than a gas furnace. RMI said that by 2020, 99% of US homes could reduce their carbon emissions by replacing a gas boiler with a heat pump.
Under the IRA, households that install a heat pump can claim a tax credit of 30% of the total purchase and installation cost, up to $2,000.
Low- to middle-income households can benefit even more by receiving rebates that can reduce the cost of a heat pump by up to $8,000. And if electrical updates are needed to install heat pumps, households can get rebates of up to $4,000 for it. These reimbursement programs vary from state to state and can be implemented through utility companies or a state-operated agency. You will therefore need to research the specifics of your state.
Buy an electric vehicle
Incentives for the purchase of new or used electric vehicles have also been strengthened in the new climate law.
For new vehicles, individuals earning less than $150,000, households earning $225,000, or co-filers earning less than $300,000 may qualify for a tax credit of up to $7,500. $. Vehicles must be made in the United States and cost no more than $80,000 for trucks, vans, and SUVs, or no more than $55,000 for others, such as sedans. The IRS has compiled a tentative list of models that would qualify.
For the purchase of a used electric vehicle, households with eligible incomes can obtain a tax credit of up to $4,000, provided the vehicle is at least two years old and does not cost more than $25. $000.