The U.S. federal government recently passed a new law called the Inflation Reduction Act (IRA). However, what you may not know is that there are a variety of provisions under the law that could save you money as a homeowner. The law includes $370 billion worth of tax credits meant to increase the development and adoption of renewable energy technologies.
However, to do that, it’s critical for American homes to transition to going completely electric. That’s where the law includes a variety of programs that you might want to know about. Here’s an overview of those programs and how the IRA incentivizes residential electrification.
Major Incentives for Solar Power
One of the most important parts of the IRA is a system of tax credits that make it easier than ever before for homeowners to afford a new solar power system. Under the law, homeowners can now qualify for a tax credit that’s equal to 30% of the cost of a new residential solar power system. As a result, more people than ever should be able to afford such systems, which will boost the use of renewable energy nationwide. According to projections, the tax credits should enable as many as 7.5 million homeowners to install solar power systems in the years to come.
Crucially, the tax credit applies to both the parts and labor associated with installing solar power equipment. And it also applies to battery storage systems, which help homes with solar power remain resilient during grid power outages and whenever poor weather hampers their panels’ power output. It also turns out to be a big deal when you consider that installing solar power generation capacity makes it far more sustainable for homeowners to turn to complete electrification elsewhere in their homes.
Generous Heat Pump Rebates
The IRA also includes a point-of-sale rebate program that covers both heat pumps and heat pump water heaters. And the rebates are generous enough that they can cover the whole cost of a heat pump for homeowners in some cases. At their maximum value, the IRA offers rebates of $8,000 for electric heat pumps and $1,700 for heat pump water heaters.
The size of the rebate that you’d receive depends on your family’s income. Each bracket depends on how much you earn compared to the average household income in California, which stands at $84,097 for 2022. The cutoffs for the rebates are as follows:
- Households below 80% of the median income or less qualify for the full rebates.
- Households between 80% and 150% of the median income qualify for 50% of the full rebates.
- Households above 150% of the median income do not qualify.
On top of that, you could also qualify for a tax credit to help cover the cost of installing heat pump systems in your home. That’s possible because of a program called the Energy Efficient Home Improvement Credit. It’s designed to encourage homeowners to install energy-efficient appliances in their homes. The credit is worth up to $1,200 per year, up to a lifetime maximum of $12,000. That means you can spread out your energy efficiency upgrades and receive a credit on your taxes that would apply to the appliances you installed that year.
You can also get a point-of-sale rebate of up to $840 for other types of energy-efficient appliances. The IRA makes it an excellent time to buy a new electric stove, range, oven, or cooktop too. The rebates that are available for those follow the same income guidelines discussed above.
Tax Credits for Electrical Upgrades
It’s also worth noting that the IRA includes tax credits meant to help defray the costs of the electrical upgrades your home might need to accommodate all of its new efficient appliances. So, if you’re performing any upgrade that qualifies under the Energy Efficient Home Improvement Credit and it necessitates such an upgrade, you’re in luck. You should be able to claim a $600 tax credit to cover the cost of a new, higher-capacity electrical panel.
There Are Also Rebates on EVs
Last but not least, the IRA also includes a system of rebates designed to encourage Americans to purchase locally-built EVs. The idea is to get more people to drive electric vehicles now that they’ll have homes wired for full electrification. All you need to do is to purchase a vehicle that meets certain minimum standards, which include:
- At least 40% of its battery mineral materials came from the U.S. or its trade allies
- At least 50% of the total value of battery materials must come from North America
- The EV’s final assembly took place in the U.S.
Notably, the minimum percentages of locally sourced components will rise every year under the program too. Plus, there are income limits that determine which buyers qualify as well as price maximums for qualifying vehicles.
In short, individuals can earn up to $150,000 annually, heads-of-household $250,000, and joint tax filers $300,000. And the vehicle you purchase can’t cost any more than $55,000 unless it’s a van, SUV, or pickup truck, in which case the limit increases to $80,000. If you meet all of those requirements, you’ll qualify for a $7,500 point-of-sale rebate on your new EV.
And you can also qualify for a tax credit on an inexpensive used EV, too. All you have to do is purchase an EV that’s at least two years old, costs less than $25,000, and is being resold for the first time. Then, as long as you don’t earn more than $75,000 per year as an individual, $112,300 as a head of household, or $150,000 as a joint filer, you should qualify for a point-of-sale credit of $4,000 or 30% of the vehicle’s cost, whichever is lower.
Consult the Home Efficiency Experts
The IRA has plenty of savings to offer homeowners who want to go all-in on electrification. And the best part about it is that the savings come from making upgrades to your home that will lower your ongoing costs and increase your home’s value. In other words, they’re a perfect win-win.
To make the most of the opportunity, though, you’ll need a trusted home service partner like Temp Air System Inc.. We offer complete heat pump and water heater installation services, which are two of the primary appliance types covered by the IRA’s tax credits. And we offer complete electrical services to help get your home ready for its fully electrified future.
We can also consult with you to help you to plan out your upgrades to take the greatest possible advantage of the IRA’s provisions. You won’t find a more trustworthy provider of HVAC and electrical services in La Puente and the greater Los Angeles county area; we guarantee it! So, if you’re ready to install a new heat pump or water heater to take advantage of the IRA’s tax credit programs, contact the experts here at Temp Air System Inc. today!
