Energy-efficient appliances, home systems and renovation materials can earn homeowners and builders federal tax credits.
By Dianne M. Pogoda
In his State of the Union address last week, President Biden touted the Inflation Reduction Act of 2022, passed and signed last year, which aims – by directing new federal spending – to lower the costs of health care, prescription drug costs and energy costs. Among its initiatives to lower energy costs, the act provides federal tax credits and deductions to Americans who are making their homes and buildings more energy efficient, including tax credits for the purchase of specific energy-efficient home appliances and systems. These parts of the legislation aim to help reduce energy costs while reducing demand as the nation transitions to cleaner energy sources, according to the Department of Environmental Protection’s Energy Star program.
Homeowner Savings
EnergyStar says federal income tax credits are available through 2032, providing up to $3,200 annually to lower the cost of energy-efficient home upgrades by up to 30 percent.
Improvements like installing and purchasing new heat pumps, heat pump water heaters, insulation, doors, windows and upgraded electrical panels, as well as conducting home energy audits and more are covered by the tax credits, and they can help families save money on their monthly energy bills in the years ahead. Among the other appliances available for rebates are electric stoves, cooktops, ranges, ovens and electric heat pump clothes dryers.
Designers and specifiers can help their clients understand that purchasing and upgrading products like windows, insulation and other materials will result in a long-term positive ROI.
Besides these energy efficiency credits, Energy Star notes that homeowners can also take advantage of the modified and extended Residential Clean Energy credit, which provides, through 2032, a 30 percent income tax credit for the purchase of clean energy equipment, such as rooftop solar, wind energy, geothermal heat pumps and battery storage. For 2033 and 2034, the income tax credit percentage will go down to 22 percent.
Builder Savings
Contractors and builders can also take advantage of the Act’s provisions, which update and extend the Section 45L Tax Credit for Energy Efficient New Homes. According to Energy Star, for homes and units acquired on or after Jan. 1, 2023, the base level tax credit for home builders is specifically tied to Energy Star certification for single-family, manufactured and multifamily homes. This tax credit has been extended through 2032.
The law states that $2,500 is available in credits for Energy Star-certified single-family homes, and $2,500 is available for Energy Star-certified manufactured homes meeting the most recent requirements, which will be implemented starting this May.
Similarly, $500 in credits is available for Energy Star-certified multifamily units meeting the Energy Star Multifamily New Construction National program and/or regional program requirements applicable to the dwelling unit.
Other credits are available and will be published by the IRS. To learn more about the credits and benefits available through the Inflation Reduction Act of 2022, visit EPA’s Energy Star site here.