On November 2, 2022, the Biden-Harris administration announced a set of energy savings programs geared towards American homeowners and families.
The benefits of this green legislation to homeowning Americans are the personal tax credits and rebates available to homeowners who install new energy-efficient or low-carbon updates to their homes beginning in 2023.
Rural Americans can take advantage of great savings on new installations. Whether you want to update an old furnace to an efficient heat pump or if you’d like to shift your reliance away from the grid with a solar installation and battery storage bank, there’s money on the table.
According to a White House Press Release, the new Biden energy savings programs are implemented to
- Lower energy costs for working families and support good-paying jobs and manufacturing in America
- Provide additional support for low- and moderate-income families
- Complement tax credits that families and building owners can use under the Inflation Reduction Act to install energy-saving equipment and to make building upgrades.
The Inflation Reduction Act (IRA) was signed into law in August 2022. Identified by President Biden as “one of the most significant laws in our history” and “the biggest step forward on climate ever,” the bill invests $369 billion in low-carbon energy sources and $64 billion towards the extension of the Affordable Care Act.
Paul Krugman, distinguished professor at the Graduate Center of Economics and expert in international trade and finance, claims the legislation will “catalyze progress in green technology” and “gives the United States the credibility it needs to lead a global effort to limit greenhouse gas emissions”.
He touted the bill as “a climate change bill with a side helping of health reform.”
The Department of Energy has allocated $9 billion in funding to states and Tribes for energy efficiency programs established under the IRA. These funds are expected to be available to consumers through their state or Tribe in mid to late 2023. They will include:
- Home energy performance-based, whole house rebates (HOME Rebates) for energy efficiency retrofits ranging from $2,000-$4,000 for individual households and up to $400,000 for multifamily buildings.
- Grants to states to provide rebates for home retrofits. Up to $2,000 for retrofits reducing energy use by 20 percent or more, and up to $4,000 for retrofits saving 35% or more.
- High-efficiency electric home rebate program, incorporating a means testing protocol providing 50% of the cost for incomes 80% to 150% of area median income, and 100% of the cost for incomes 80% of area medium income and below on purchases including:
- $8,000 cap for heat pump purchase and installations
- $1,750 cap for a heat pump water heater
- $4,000 for electrical panel/service upgrade
Rebates are capped at $14,000 per household and will also include purchases on electric stoves and clothes dryers, and insulation/air sealing measures, according to the Department of Energy.
The IRA also extends to property owners the Energy Efficient Home Improvement Credit and the Residential Clean Energy Property Credit through 2032 and 2034, respectively. The Energy Efficient Home Improvement Credit is increased from a $ 500 lifetime credit to a $1,200 annual credit, equal to 30% of costs by the taxpayer on qualifying expenditures, and all costs must be incurred during the current year as applying.
Qualifying expenditures are:
Energy efficient building envelope components (doors, windows, insulation)
- Home energy audits
- Efficient residential energy installations such as central air conditioners, water heaters, furnaces, electrical service panels
- Efficient heat pumps and biomass stoves and boilers
30% credit rates are also available to taxpayers for residential low-carbon property installations through the Residential Clean Energy Property Credit.
The updated credit incentivizes renewable energy installations on residential properties, including tax credits for new installations on:
- Solar panel installations
- Solar water heaters
- Fuel cell installations
- Small wind turbines
- Geothermal heat pumps
- Battery storage installations (battery storage for residential solar power)
Updates to the Residential Clean Energy Property Credit consider new and emerging technologies as well, such as solar collecting roofing shingles, and include them as qualifiers for the tax credit. Except for fuel cell installation expenditures, there is no cap on the total dollar amount that can be received through the updated credit through 2032.
Outside of programs enhanced through the Inflation Reduction Act, LIHEAP, the Low Income Home Energy Assistance Program, recently received $4.5 billion to help reduce heating costs for Americans during winter.
While many households with non-efficient heating systems cannot afford to update to new efficient systems and must continue to make repairs to heat their homes, LIHEAP allocates money to states and Tribes to assist low-income American families with heating/cooling bills and mechanical repairs with grants during the most extreme months of the year.
The program targets households that use a large percentage of their household income on home energy costs, namely those with members who are elderly, disabled, and children. Visit the LIHEAP Map State and Territory Contact Listing to find your state’s website for qualification and application procedures. To find more information on rebates provided by the Department of Energy and tax credits from the IRS, visit CleanEnergy.gov and sign up for updates. Also, check out the Inflation Reduction Act Calculator from Rewiring America for a personal estimate of your potential rebates and credits.