Originally posted by Atlanta Building News | Spring 2023 issue
On January 1, the Inflation Reduction Act (IRA) began its financial support for residential energy efficiency upgrades, including upfront discounts and tax credits. The upfront discounts are designed to be taken directly off the bill at the time of purchase. The tax credits will work as a provision to reduce a participating taxpayer’s final tax bill. Between the discounts and tax credits, 18 different energy efficiency measures are supported by more than $60 billion in IRA funding.
There are some limitations on IRA eligibility based on household income and ZIP code. Emphasis has been placed on disadvantaged communities, and most of the discounts are based on the income status of a household. Low-income households are eligible for a full discount, medium-income households are eligible for 50 percent of a discount, and high-income households are not eligible for any discount. As a reference, low-income households are defined as those making 80 percent of area median income and medium-income households are defined as those making 80 percent to 150 percent of area median income.
There are eight upfront discounts. All of them will be available later in the year:
Electric Stove: $840. Both traditional electric resistance and electric induction stoves are eligible for this discount. The goal is to remove gas systems from homes, which are sources of carbon monoxide, nitrogen dioxide and other pollutants linked to asthma. When choosing between an electric resistance or electric induction stove, consider induction first. Induction cooking is safer than both electric resistance and gas appliances, as the cooking surface does not get hot (only the pans and food do) and they can control cooking temperatures more accurately than any other option on the market today.
Electric Panel: $4,000. Upgrading an existing home’s electrical panel may be necessary for homeowners moving toward an all-electric home or who want to invest in solar panels. The IRA has planned for this and is offering a discount on the cost to purchase and install a new panel. As a bonus, this upgrade is also eligible for an additional $600 tax credit.
Electric Wiring: $2,500. Just like with the panel, a home’s wiring may require upgrading when new electric appliances are installed.
Heat Pump Water Heater: $1,750. Heat pump technology uses refrigerant to move heat from the surrounding air and transfer it into the water heater tank. Transferring heat rather than generating it through electric resistance or burning a fuel is a very efficient form of water heating. Heat pump water heaters are also eligible for a $2,000 tax credit.
Heat Pump HVAC: $8,000. Like the water heaters above, heat pump HVAC systems use their refrigerant for both heating and cooling indoor air. These systems are three to five times more efficient than current fossil fuel systems, and improvements over the years mean that they can collect heat even during extremely cold weather. Heat pump HVAC systems are also eligible for a $2,000 tax credit.
As noted in the discounts, electric panels, heat pump equipment and weatherization are all eligible for tax credits. The other tax credits focus on electric vehicles, solar installations and geothermal HVAC:
New Electric Vehicle (EV): Up to $7,500. This will apply to vehicles with a maximum manufacturer’s suggested retail price (MSRP) of $55,000 and vans/SUVs/trucks with a maximum MSRP of $80,000. In 2023, this credit will be limited to geographic manufacturing requirements. In 2024, it is planned to be transferrable to dealers.
Used Electric Vehicle: Up to $4,000. This will apply to 30 percent (up to $4,000) of the cost of a used EV with a maximum MSRP of $25,000. Electric Vehicle Charger: $1,000. This is only available to homes in rural or low-income communities.
Rooftop Solar Installation: 30 percent. An uncapped 30 percent tax credit is available for residential solar. A 30 percent tax credit is also available for an electrical panel upgrade, but only when it is paired with the rooftop solar. Battery Storage: 30 percent. An uncapped 30 percent tax credit is available for battery storage installed to serve rooftop solar systems.
Geothermal HVAC: 30 percent. An uncapped 30 percent tax credit is available for residential geothermal HVAC systems. This applies to the ground loop system and compliant equipment.
A very helpful tool has been developed by Rewiring America to help homeowners identify all the discounts and tax credits they will be eligible for: www.rewiringamerica.org/app/ira-calculator. Rewiring America also tracks when the upfront discounts will be available and is providing the full details on how to document eligible purchases for the discounts and tax credits.