Inflation Reduction Act

How does the Inflation Reduction Act benefit homeowners?

As noted above, one of the primary purposes of the Inflation Reduction Act is to address climate change and reduce the effects of global warming. While the bill focuses significantly on encouraging businesses to prioritize clean energy and eco-friendly practices, the bill also provides incentives for residential property owners.

Homeowners can reduce their tax bill with rebates and tax credits for installing energy-efficient doors, windows, water heaters, furnaces, heating and cooling systems, and more. By making energy-efficient upgrades, homeowners can lower their utility costs and reduce their environmental footprint.

Energy Efficient Home Improvement Tax Credit

One of the most critical components of the IRA is the Energy Efficient Home Improvement Tax Credit (25C). This new tax credit is a revamped version of what was previously known as the Nonbusiness Energy Property Credit, which offered a 10% tax credit to homeowners who made eligible home improvements. As of January 1, 2023, homeowners can receive a 30% tax credit for qualified upgrades. Although the previous tax credit was offered as a one-time credit, homeowners can now claim tax credits under 25C each year.

Features of the Energy Efficient Home Improvement Tax Credit:

• Increases the tax credit from 10% to 30% of the cost for all eligible upgrades made between January 1, 2023 and December 31, 2023.
• Includes a $1200 annual cap for HVAC and home envelope improvements, such as windows, doors, and insulation.
• The annual cap increases by $2000 (up to $3200) with a qualified heat pump installation.
• There are no income requirements to receive the tax credit.
• Homeowners can now claim the tax credit annually rather than as a one-time credit.
• Claims must be submitted when filing 2023 taxes.