No, the government won’t pay you
... to install solar or make improvements on your home for “free.” But there are plenty of new or improved tax incentives in the federal …
... to install solar or make improvements on your home for “free.” But there are plenty of new or improved tax incentives in the federal Inflation Reduction Act of 2022. Most are effective as of January 1.
The IRA (as it’s known, not to be confused with retirement finance), signed by President Biden in August last year, is over 720 pages of dense regulatory language. While the Internal Revenue Service (IRS) has yet to provide most of the rules and procedures for claiming these benefits, the White House and others have been trying to get the word out. And unfortunately, some not-so-honest advertisers are spamming us with false or mostly false information.
The IRA has over $370 billion over the next 10 years in various agency authorizations; healthcare, labor, transportation and environmental improvements; and there are many significant changes to federal tax law, including economic incentives for domestic manufacturers, utilities, businesses and individuals. Way more than I can discuss here or hope to figure out myself.
In the area of residential clean energy, the IRA has new or improved tax incentives for many home energy conservation and upgrade projects, such as for energy audits, electrical upgrades, heating/ventilation/air conditioning, upgrading windows and insulation, water heating and even electric cooking and clothes dryers. The dollar amounts and rules vary by type.
The IRA also returns the residential renewable energy tax credit to 30 percent of the cost for installing solar, wind, geothermal—and now battery storage systems as well.
These upgrades and installations can be for second homes, as well as for a primary home.
With the recent extra-high prices for fuels and electricity, these home projects can significantly reduce your utility bills by lowering your energy purchases. That’s an investment that pays back, not just from the tax benefits, but on utility bills for years to come. Plus, energy-efficient homes are more valuable when it’s time to sell.
The IRA also reinvigorated the $7,500 clean vehicle federal tax credit. Individual purchases of new (and now some used, but capped at $4,000), domestically assembled fuel-cell, plug-in hybrid and electric vehicles (EV) could be eligible. Many EV models that had “expired” under the old program are now eligible again. However, there are also new qualification limits, including maximum income level, maximum price and minimum battery size. Check carefully with your dealer rather than assume a purchase is eligible.
Then there’s an additional tax credit of up to $1,000 for installing a home EV charger.
In the past with most federal tax credits, to receive the benefit you had to file federal taxes and have a significant tax liability, which many people don’t have, especially those with lower incomes and retirees. With the new rules, some of these federal tax credits are to become “transferable.” Meaning that a contractor, dealer or bank could receive the benefit from your tax credit, even if you don’t have a tax liability.
How these transfers will work is one of the most anticipated unanswered questions waiting on the IRS. The IRS has already missed the deadline given in the law, but hopefully we’ll learn the details soon. Given the risks and paperwork complexity, those entities are unlikely to give a full dollar-for-dollar upfront discount in exchange for a year-end transfer of your tax credit.
Nevertheless, many more people will benefit from these improved clean energy incentives, leading to reduced future costs for most homeowners, plus cleaner and more sustainable transportation and energy systems for the nation.
These, plus the IRA’s many additional incentives for industry and businesses, are the reason for the claim that the IRA will, by 2030, reduce the United States’ climate-impacting annual emissions by 40 percent from 2005 levels. It’s a good start but still a long way to go to reach our international commitment to net-zero emissions by 2050.
Have questions about clean energy? Send them to email@example.com and Jack will attempt to answer your questions in future sustainability articles.
Jack Barnett is a retired electrical engineer, and is now a volunteer solar energy and sustainable-living advocate on the board of SEEDS of Northeastern PA (www.SeedsGroup.net). He is also a co-founder of the Clean Energy Cooperative (www.CleanEnergy.Coop). Both groups are based in Honesdale, PA.
The Inflation Reduction Act (IRA) of 2022 makes the single largest investment in climate and energy in American history, enabling America to tackle the climate crisis, advancing environmental justice, securing America’s position as a world leader in domestic clean energy manufacturing and putting the United States on a pathway to achieving the Biden Administration’s climate goals, including a net-zero economy by 2050.
• $370 billion over the next 10 years in various agency authorizations; healthcare, labor, transportation and environmental improvements; and economic incentives for domestic manufacturers, utilities, businesses and individuals.
• New or improved tax incentives for home energy conservation and upgrade projects
— energy audits, electrical upgrades, heating/ventilation/air conditioning
— upgrading of windows and insulation, water heating and electric cooking appliances and clothes dryers
— residential renewable energy tax credit to 30 percent of the cost for installing solar, wind, geothermal, including battery storage systems.
— $7,500 clean vehicle federal tax credit for individual purchases of new (and some used, capped at $4,000), domestically assembled fuel-cell, plug-in hybrid and electric vehicles (EV).
— $1,000 for installing a home EV charger.
• Additional incentives for industry and businesses with a goal to:
— Reduce the U.S.’ climate-impacting annual emissions by 40 percent from 2005 levels by 2030
— Reach the U.S.’s international commitment to net-zero emissions by 2050
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