USING 2023 ENERGY TAX CREDITS FOR YOUR HOME

Upgrading your home? Grab the benefits of energy efficiency tax credits!

As the price of energy continues to rise many homeowners have begun investigating ways to make their homes more energy efficient. Although energy-efficient upgrades may be somewhat more expensive than their less efficient counterparts, recent legislation like the Inflation Reduction Act of 2022 is helping to make these upgrades more accessible to encourage homeowners and businesses to reduce their energy consumption.

Whether replacing applicances like washing maching and dryer, refrigerator or your air conditioning system to more major home modifications there are energy rebates or credits if you do the changes to incorporate their requirements. In the following sections we'll briefly explore the various tax rebates available for modifications that bring energy-efficiency into the home, the benefits of making these upgrades, and how you can take advantage of these incentives.

What are Energy Efficiency Tax Credits?

To begin with, Energy Efficiency Tax Credits are an incentive offered to homeowners who make energy-saving improvements to their homes. These tax credits are available for several upgrades, such as energy-efficient windows, added attic insulation, higher efficiency heating and cooling systems, and solar panel installations. The specifics of what is offered and for what differ greatly based on type of upgrade, the location and income. To find out if you qualify for any of the credits or rebates listed below, consult a tax advisor for specifics on the rebates and credits you may be eligible for in your area.

How is the Inflation Reduction Act Related?

In August of 2022, the Biden admin- istration signed a bill called the "Inflation Reduc- tion Act" (or IRA) into law. This piece of legislation was intended to create a framework to allow for a nation- wide boost in the use of clean energy, reduce the cost of healthcare and increase tax revenue over the coming decade. The incentives provided have mostly been in the form of tax credits and rebates allowing homeowners to make improvements and modifications to their homes for less, so long as they adhere to specific energy efficiency standards.

What Home Rebates Are Available?

While this list is by no means comprehensive, these are a couple of the more notable credits and rebates available in 2023. For more information, check with additional resources such as this comprehensive write-up at www.solar.com or the FAQ on these credit types at IRS.gov.

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The High-Efficiency Electric Home Rebate

Another popular homeowner incentive included in the IRA was the "High-Efficiency Electric Home Rebate," a consumer rebate for low and moderate-income households that provides greater accessibility to energy-efficient appliances and modifications by reducing the costs necessary to purchase them. Depending on your household income, this rebate could cover from 50% to 100% of your project's cost (up to $14,000) and includes the installation of new heat pumps, upgrades like insulation, as well as installing more energy efficient lighting. The goal of this rebate, like many of these incentives, is to help American homeowners save money on their monthly energy bills and create healthier indoor environments.

The Energy-Efficient Home Improvement Credit

Another popular program is the Energy-Efficient Home Improve- ment Credit (or EEHIC).

The EEHIC allows home- owners to claim up to 30% of the total of eligible home improve- ment projects made during the year. There are limitations, however, as the credit is capped at a certain amount per project and has a total annual cap of $1200, but the credit has no income requirements, meaning anyone taking steps to remodel more efficiently can reap the added benefits of doing so.

Where To Get Started

An excellent place to begin is with a "home energy audit," or assessment that can help you to determine how efficiently (or inefficiently) your home is expending energy. This audit will examine everything from air leaks around windows and doors, leaks in your heating and cooling ductwork to the quality of your attic insulation. It is designed to find all of your home's energy-related shortfalls.

While handy types can make these assessments themselves. The Geni Manning Real Estate Group has a List of Preferred Vendors that includes professionals who can perform the audit for you. These inspectors are trained to discover things you wouldn't think to look for. Regardless of how you do it, having an audit is a great first step in finding out where your home stands. Once you know where your home is losing energy, you can start making improvements and sift through the list of available rebates and credits more effectively based on your need.

Do I Need to Upgrade My Home?

The short answer? No – so long as your home and its appliances are functional, none of these upgrades are necessary. However, if you are upgrading and remodeling with the aim of selling in the near future then these having an energy efficient home can be an excellent selling point so long as you don't go too far beyond your neighbors. If this is you, then take a look at another of our blogs titled Should I Update My Home?

The aim of these tax credits and incentives is to lower the energy costs you pay out over time. Research data suggests somewhere between 10-20% of what the average American pays in energy bills annually is wasted due to air leaks and outdated appliances. Energy efficiency modifications cost money up front but are often considered to save significantly in the long run. While we wouldn’t recommend making costly upgrades just for the rebates it does make sense if you’re planning an upgrade or modification to consider not only the estimated savings in energy cost over time – the credits and rebates are icing on the cake.

Conclusion

Because of recent legislation and general awareness of environmental impacts, more tax credits and rebate programs are available to help you upgrade your home with more energy-efficient standards than ever before. From heat pumps to insulation rebates, there are plenty of options. Start with an audit of your home and determine what upgrades you can make to your home to be more energy efficient and save money on your utility bills for years to come!