The Inflation Reduction Act – An Overview for EAP Members

As many of you know by now, the Inflation Reduction Act has been signed into law. This means incentives for many of the products and services our members offer.  Below is a summary to help you navigate the credits and rebates available this year and beyond.
 
Federal Tax Incentives Retroactively Available in for 2022
The Energy Efficiency Home Improvement Credit (formerly the Nonbusiness Energy Property Credit) is a Federal Tax Credit available to consumers for the 2022 Tax Year. The provisions are as follows for 2022:

  • Claim 100% of the costs associated with installing certain energy-efficient water heaters, heat pumps, central air conditioning systems, furnaces, hot water boilers, and air circulating fans.
  • There is a lifetime limit of $500 for the credit (e.g., credits taken in previous years count towards the limit). There was also a $200 lifetime limit for new windows. 
  • There are individual credit limits for air circulating fans ($50); some furnaces and boilers ($150); and certain water heaters, heat pumps, and air conditioning systems ($300).

View Qualifying Equipment and Credits:

https://www.energystar.gov/about/federal_tax_credits/non_business_energy_property_tax_credits

Energy Efficiency Home Improvement Credit 2023

The tax credit will be equal to 30% of the costs for all eligible home improvements made during the year. In addition, the following has been outlined for 2023:

  • The lifetime limit will be replaced by a $1,200 annual limits on the credit amount
  • Limits for qualifying improvements:
    • $150 for home energy audits;
    • $250 for an exterior door ($500 total for all exterior doors);
    • $600 for exterior windows and skylights; 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; and
    • $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves and boilers (for this one category, the $1,200 annual limit may be exceeded).

Eligible home improvements after 2024 will not be available for credit unless the manufacturer of any purchased item creates a product identification number for the item, and the person claiming the credit includes the number on his or her tax return.

Residential Clean Energy Credit (formerly the Residential Energy Efficient Property Credit)

This tax credit is now worth 30% (previously 26%) of the cost to install qualifying systems that use solar, wind, geothermal, biomass or fuel cell power to produce electricity, heat water or regulate temperatures in residences. This credit is available through 2032, and then will fall back to 26% for 2033 and 22% for 2034 (after which the credits expire).

Alternative Fuel Refueling Property Credit (e.g. EV Charging Systems)

The Alternative Fuel Refueling Property Credit has been extended through 2032. This credit is worth 30% of the cost of “qualified alternative fuel vehicle refueling property” installed in the home, up to $1,000.

High-Efficiency Electric Home Rebates

This rebate (not a tax credit) is available to low-and-middle income families who purchase energy-efficient products whose family’s total annual income is less than 150% of the median income where they live.  Rebates go as high as:

  • $840 for a stove, cooktop, range, oven, or heat pump clothes dryer
  • $1,750 for a heat pump water heater
  • $8,000 for a heat pump for space heating or cooling

Non-appliance upgrades that qualify for rebates include:

  • $1,600 for insulation, air sealing, and ventilation
  • $2,500 for electric wiring
  • $4,000 for an electric load service center upgrade

There are limits on the amounts consumers can qualify for; learn more about these rebates here.


Sources:

Save More on Green Home Improvements Under the Inflation Reduction Act: https://www.kiplinger.com/taxes/605069/inflation-reduction-act-tax-credits-energy-efficient-home-improvements 

The Electric Explainer: Key programs in the Inflation Reduction Act and what they mean for Americans: https://www.rewiringamerica.org/policy/inflation-reduction-act 

EV Tax Credits Are Changing: What’s Ahead: https://www.kiplinger.com/taxes/605081/ev-tax-credit-inflation-reduction-act-2022-changes

Resources:

2022 Energy Star Equipment Tax Credits for Residences: https://www.energystar.gov/about/federal_tax_credits/non_business_energy_property_tax_credits 

Rewiring America Inflation Reduction Act Savings Calculator (for incentives after 2022): https://www.rewiringamerica.org/app/ira-calculator

Interested consumers should consult their tax professional to ensure they meet all qualifications for credits. This legislative overview is not intended as any type of advice regarding tax credits, eligibility, or qualifying systems.