Inflation Reduction Act 2022: What Homeowners Must Know About It?
Solar and wind installations in the US could account for 40% to 62% of the total electricity generation by 2030, per a report from the National Renewable Energy Laboratory (NREL). This means an additional 550 gigawatts of electricity will be generated via renewable sources in less than 10 years.
The forecasted growth is an impact of the largest clean energy investment that America has ever made — The Inflation Reduction Act (IRA) of 2022. Signed into law by the Biden Administration on August 16, 2022, it introduced $369 billion in tax credits and incentives for renewable energy investment and climate change, along with the Bipartisan Infrastructure Law (BIL) to amplify jobs and infrastructure investment.
The bill directs new federal spending toward home improvement credits for energy efficiency — tax credits, upfront discounts, energy storage installations, and low-cost financing — to encourage clean energy production, reduce global carbon emissions, and better the taxpayer’s compliance.
The amazing part is, you can think of the Inflation Reduction Act of 2022 as a free bank account registered in your name.
Think of it as a personal fund to go electric, from the appliances you use daily to the car you drive. Besides, it will also encourage you to swap your old, fossil-fueled appliances for new, clean electric ones, without worrying about the expenditure.
Whatever works best for you!
Hence, undoubtedly, it is one of the most transformational policies in history, for climate change mitigation, a further boost to “clean energy” in the country.
Why Go Electric?
There are three key reasons to do this.
1. A clean home is an affordable and healthy home
Did you know that burning gas in the home is much alike passive smoking? It is also a brutal factor in childhood asthma. Fossil fuels pollute the air with toxic chemicals that harm human health. This is why electric cooking and home heating appliances are a great alternative to non-renewable energy machines. The IRA bill is estimated to save 180,000 American lives through 2030 via improved air quality alone.
2. Save Money
Electric appliances and EVs are cheap when compared to fossil fuels. The IRA offered electric vehicle tax credits are an attractive financial option to reduce the machine’s up-front costs by themselves. By saving ~$1,800 a year, you will no longer be obliged to oil volatility. Also, for low-income households, the discounts from IRA will unlock lower energy bills year-over-year.
3. Control Your Choices
As individuals, it is time you start fighting the climate crisis. Going electric can reduce ~42% of harmful emissions happening from households alone. So, the bonus with IRA is that you control your power. Reliance on solar panels lets you brush aside the downsides of price eccentricities, thus helping the community save on massive energy bills while supporting local businesses too.
4. Extend options and credit subsidies
With a green future being the goal, the Inflation Reduction Act of 2022 provisions money for:
- Environmental programs for disadvantaged communities
- Community-led climate projects
- Pollution reduction at transport hubs
- Energy-efficient affordable housing, and more.
Small community solar projects (under 1 MW) will get a base ITC of 30% through 2033. The US Department of Energy’s Loan Program Office will give credit subsidies and energy-efficient home improvement credits for direct loans and loan guarantees to upgrade, renovate, or replace energy infrastructures.
Clean and sustainable energy is American-owned, and the IRA will help keep costs cheap and predictable for several years to come.
The Role of The Inflation Reduction Act (IRA)of 2022 in Solar
From residential homeowners to rooftop installers, the Inflation Reduction Act or the IRA offers ample benefits to all.
Residential Clean Energy Credit (Section 25D)
The long-term extension of the 30% Residential Clean Energy credit, or the solar investment tax credit or ITC is a valuable provision under the IRA.
If you are a homeowner installing solar between 2022 start through 2032 end, you can deduct 30% of the cost from federal income taxes. Remember, there’s no cap on the total amount spent. Yes, you read that right.
The residential clean energy credit will then wind down to:
- 26% in 2033
- 22% in 2034
- 40% for 2035 and beyond
Moreover, you can carry over unused credit to the next year if you owe less than that amount in federal taxes for the year when you have installed the system.
Let’s take an example.
This summer, you plan to buy a rooftop solar array for $30000 for your house. If you start in November or December, the installation date will be around 2024 given the time requirement. Without the Inflation Reduction Act of 2022 (IRA), you would get a tax credit of 22% on the total project cost, which is $6,600.
But with the latest incentive beef up to 30%, your tax credits will be pushed to $9000.
**Always consult a tax professional with questions on updates about the solar tax credit.
Quick note: The same applies to battery storage! Standalone residential energy storage projects will get a 30% tax credit in IRA on installed solar and battery storage equipment.
Energy Efficient Home Improvement Credit (Section 25C)
The Energy Efficient Home Improvement Credit allows homeowners to deduct up to 30% of the cost of home upgrades from their taxes.
It covers the cost of:
- Installing electric appliances
- Installing additional electrical loads
This, in turn, covers exterior doors and windows, skylights, home energy audits, energy-efficient air conditioners, biomass stoves, water heaters, etc.
You can receive the credit for purchases made after January 1, 2023, and before January 1, 2033. There is a cap on this:
- $1,200 a year for renovations
- $2,000 for appliances like heat pump water heaters
Electric Vehicle Tax and Charging Credit (Section 30D and 30D)
The Electric Vehicle Tax Credit covers a $7,500 consumer tax credit for electric vehicle purchases. It depends on MSRP and income limits. It is also capped at the same amount as needed to install electric vehicle chargers.
You can check if your EV vehicle qualifies for the $7,500 (Electric Vehicle Tax Credit) by checking:
- For cars purchased in 2022 or before
- For cars purchased after January 2023
- List of eligible vehicles
- For unused cars
- For commercial vehicles
Electric Homes Rebate Programs
Unlike credits, the rebates offered in IRA are a game changer.
HEERA or High Efficiency Electrification Rebates offers $4.3 billion for home retrofits with rebates up to:
- $8,000 for low-to-moderate-income households (any household making less than 80% of AMI or area’s median income can be defined as low-income or low-to-moderate income)
- $14,000 for electrification updates for appliances and breaker box upgrades
- Low-income families will have 100% of this cost covered while moderate-income families will only get 50%
- Moderate and low-income households with income over 150% of the area median income (AMI) won’t qualify for the rebates.
- Instead, they can pair this saving with tax credits for additional savings
Here’s what to know about the perks and the advantages of a home eco-update.
This product is a better choice compared to air conditioners, water heaters, and furnaces, and can be powered by solar energy. These pumps do not generate heat or combust fossil fuels, rather they transfer the heat, which in turn helps thousands of dollars per year in savings. The IRA help homeowners with an energy-efficient home improvement credit of $1750 - $8000 for appliance purchase.
• Electric/Induction Stoves
These are more effective than gas and are cheap to operate. Because you only use the stove for a few hours daily, your bill won’t add up to much every month. IRA includes a $840 rebate for qualifying households to purchase an induction stove.
• Radiant Floor Heat
This appliance has a tubing system underneath the house’s floor which heats up once water is passed through it. Being more efficient than most motor or forced air systems, radiant heat floors are expensive too - with the price ranging between $20 per square foot. You can avail of the exclusive tax rebates under IRA to buy this.
• Doors and Windows :
Householders can benefit from 30% tax credits, which is ∼$1,200 annually to proceed with eco-friendly home upgrades. Within this, $600 is specified for windows and $500 is for doors. Weatherization, as it is otherwise called, involves air sealing, ventilation, insulation, etc. It can save you huge money by reducing energy waste. The IRA also pays upto $150 for a home energy audit, utilized to assess a home’s total energy usage.
• Washing Machines and Dryers
Studies say that an average American family runs approximately 300 loads of laundry per year. That consumes tons of water and energy. Once you replace your old model, it drastically reduces excess energy use and ultimately brings down the bills. The rebate offered by IRA for an electric heat pump clothes dryer is $840.
• Electric Panels
You get electricity in your home from the electric grid. The current is distributed to different circuits through your home’s electrical panel. People know it by the name breaker box. Depending on electrical needs, you can electrify your entire house with 100A Amps with smart panels. Upgraded panels not only save money but allow other significant like heat pumps.
• Electric Wiring
Whole home electrification is never possible without proper electric wiring. Upgraded wiring is not only beneficial for operating home appliances and electric vehicle charging but is an environment-friendly option too.
The rebate equals a discount, says Jamal Lewis, director of Policy Partnerships and Equitable Electrification at Rewiring America. Buyers who make 80% or less of the area median income can access most money, and those making 150% see a minimal benefit.
IRA and Increased Credits for Solar Panels
Regarding solar panel installations, homeowners get a tax credit of 30% to buy and sell solar panels under the Inflation Reduction Act of 2022. The amount is up from the previous 26% with no dollar limits.
For instance, if you spend $15,000 to install solar panels on your house, you can claim a tax credit of around $4,500.
And, as we already discussed, unused credit will be carried forward to future years, which means that if you do not owe any tax this year, you can always utilize it later.
For householders who are willing to capture solar power by themselves, the IRA Act would help them assemble the existing credits for residential solar, and with storage solutions like giant batteries. When combined, it can lower the building’s load on an electric grid during peak hours (like functioning air coolers during a heat wave).
The Time for Home Electrification is Now
The Inflation Reduction Act of 2022 is a game changer for America’s energy future. By 2032, the IRA will contribute $600 billion in solar investments and solar will produce more electricity than coal-fired power plants. The current recession also brings the hard truth of energy getting more expensive each day. This is where sustainable sources like solar will notably reduce the consumer’s burden of inflation.
From the above data provided by Solarblocks, you can now understand that clean energy like solar panels is the future and billions of dollars are already invested to create domestic manufacturing infrastructure.
Come forward and join hands in this greater cause to save our only habitat, our earth. Not for anyone. For your children.
Invest in solar panels.
Save money and save the world.
To know more about federal tax credits, and state and local tax credits, connect to Solarblocks. Just email us at email@example.com or call 347 226 0695. An expert will resolve your queries within 24 hours.
Begin Your Journey From Today
Let your sustainable way of life begin here..
Begin Your Journey From Today
Let your sustainable way of life begin here..