There has never been a better time to improve your home’s long-term value and efficiency than now, thanks to the passage of the The Inflation Reduction Act (IRA). Although the IRA has introduced various new tax breaks and credits for energy upgrades and clean tech tools to help save you money this tax season, navigating these items, rebate amounts and eligibility factors can be a daunting task.
In order to maximize savings, it is important to outline some of the best ways to take advantage of the IRA’s offerings to help offset costs on improvements made for the 2023 tax season and beyond.
Home Energy Audits
One of the best tax-deductible ways to first approach improving energy efficiency is by conducting a home energy audit, which the IRA allows homeowners to claim 30% of costs up to $150. These assessments can cost as low as $100-150 and reveal areas of your home where you’re wasting the most energy and money so you can properly prioritize upgrades and maintenance.
Fixes for the most common issues typically found during energy audits are also covered by the IRA. Poor insulation which can account for between 35-40% of heat loss in homes can be replaced and claimed for 30% of cost.
Inefficient air conditioners and heating equipment can be upgraded, qualifying for tax credit offering to cover 30% of cost, up to $600. Other covered upgrades that may be discovered as issues during an audit include exterior doors, windows, and skylights.
Additionally, utility companies will often offer promotions for making any energy efficiency upgrades that can help bring your bill down on top of IRA incentives.
The Energy Star website will list qualified contractors in your area and these audits are now eligible for a tax credit through the Inflation Reduction Act.
Adopting Clean Technology
Investing in a solar PV system is a sure way to provide significant savings on energy bills in the long-term, and the large upfront costs typically associated with doing so can be substantially reduced with IRA incentives.
Solar PV systems installed between January 1, 2022 through the end of 2032 are eligible for a tax credit of 30% of the cost. With the average rooftop solar installation costing around $20,000, the IRA-provided credit would be around $6,000.
In addition to saving you money on bills, solar will also increase the value of your home. According to the National Renewable Energy Laboratory, your home value increases by $20 for every $1 you save on energy bills. According to Zillow, homes with solar panels sell for four percent higher than those without them as well.
For those looking to add battery-storage systems to their solar, tax credits are also available. Starting for systems installed in January 2023, homeowners can receive a 30% tax credit for a battery storage installation, even if it’s not paired with a solar system. Battery storage systems can offer a more stable source of power, as well as help you avoid raising electricity rates.
your home value increases by $20 for every $1 you save on energy bills
Looking to the Future: High-Efficiency Electric Home Rebates
Later this year, the DOE will release billions to State Energy Offices to support the Home Energy Rebate Program, which will provide home electrification and appliance rebates to low and moderate-income households. This includes appliances with ENERGY STAR certification, such as electric stoves and electric heat pump water heaters.
ENERGY STAR certified appliances are those that meet high energy-efficiency specifications set by the EPA, providing tremendous potential for savings; an ENERGY STAR certified clothes washer, for example, can cut your energy costs by about a third and water costs by more than half.
As new incentives become available for energy efficiency, now is the perfect time for homeowners to not only take advantage of opportunities to reduce energy costs, but also the global effort towards sustainability. Consider consulting with a tax professional while reviewing these credits and rebates too, who can offer you further guidance on taking the right steps.
