If you've been thinking about making improvements on your home, now may be a good time to do so with the tax breaks offered by the Inflation Reduction Act.
One of the act's main initiatives is to help homes and businesses adopt cleaner energy solutions to lower energy costs and reduce harmful pollution. This includes offering tax deductions for homeowners on energy-efficient appliance installations and home improvements.
To help you better understand how you can benefit from the Inflation Reduction Act, we'll go over:
What the Inflation Reduction Act is
Credits and rebates available through the Inflation Reduction Act
How to qualify for Inflation Reduction Act credits and rebates
Benefits of converting to renewable energy
Want a tax break by making your home more energy efficient? Call Reliable Heating & Air at (770) 594-9969 or schedule an appointment.
Our HVAC, plumbing, and electrical experts know the best options for high-efficiency heat pump water heaters, heat pumps, electrical panel upgrades, and more. We'll go over how to reduce your energy usage to help you make tax deductible home improvements that will also lower your electric bill year-round.
What is the Inflation Reduction Act?
The Inflation Reduction Act of 2022 is an initiative designed to help curb inflation by:
Investing in domestic energy production and manufacturing
Reducing carbon emissions by promoting clean energy solutions
Lowering prescription drug prices and healthcare costs
To help promote clean energy solutions, the act offers tax deductible home improvements for homeowners.
Inflation Reduction Act home improvement credits and rebates
The Inflation Reduction Act offers 4 home improvement tax breaks (one of which is for developers and contractors):
Tax credits |
Energy efficient home improvement credit |
New energy efficient home tax credit |
Offers homeowners deductions for reducing energy usage by making energy-efficient home upgrades |
Offers developers and building contractors deductions for energy-efficient and Zero Energy Ready new or reconstructed homes |
|
Rebate programs |
High-efficiency electric home rebate program |
Home energy-performance-based whole-house rebate program (HOMES rebate program) |
Gives homeowners rebates (based on income) for installing new efficient electric appliances |
Gives homeowners rebates for making improving home energy efficiency |
We'll cover the Inflation Reduction Act rebates and credits for homeowners in more detail.
High-efficiency electric home rebate program
This rebate program offers homeowners up to $14,000 in tax reduction rebates when you replace fossil-fuel HVAC systems and appliances (furnaces, boilers, water heaters, stoves, etc.) with high-efficiency ones powered by renewable energy sources, and make certain energy-efficient upgrades.
Through the high-efficiency electric home rebate program, homeowners can get up to:
$1,750 for a heat pump water heater
$8,000 for a heat pump for space heating or cooling
$840 for an electric stove/range/oven or an electric heat pump clothes dryer
$4,000 for an electric load panel upgrade
$1,600 for insulation, duct sealing, and materials to improve ventilation
$2,500 for electric wiring
Energy efficient home improvement credit
This credit offers tax deductions for homeowners who lower their home's energy usage by improving insulation and making energy-efficient upgrades.
Homeowners who cut their energy usage by 20% could claim a rebate of up to $2,000 or 50% of the improvement cost (whichever is less). The rebate amount doubles if you cut your energy usage by 35%.
Through the energy efficient home improvement credit, you can get up to:
$150 for a home energy audit
$250 for one exterior door and $500 for all exterior doors
$600 for exterior windows and skylights
$2,000 for eligible high-efficiency heat pump water heaters, heat pumps, air conditioners, furnaces and boilers
Residential clean energy credit
This credit offers a tax reduction by installing solar panels or other energy equipment that harnesses energy fueled by renewable resources like wind, geothermal activity, biomass or fuel cells.
Through the residential clean energy credit, you can claim on your annual taxes:
30% of the installation cost through 2032
26% of the installation cost in 2033
22% of the installation cost in 2034 (credit expires after that)
Other credits and rebates you might benefit from
Renewable energy installation
The residential clean energy credit offers a tax reduction by installing solar panels or other energy equipment that harnesses energy fueled by renewable resources like wind, geothermal activity, biomass or fuel cells.
Through the residential clean energy credit, you can claim on your annual taxes:
30% of the installation cost through 2032
26% of the installation cost in 2033
22% of the installation cost in 2034 (credit expires after that)
Electric vehicle credit
You can also benefit from the Inflation Reduction Act if you're looking to buy a new or used electric vehicle. On eligible electric vehicles, you could get up to:
$7,500 for new electric vehicles
$4,000 for or 30% of the cost of (whichever is less) used electric vehicles. Used electric vehicles don't qualify if purchased for resale.
You can claim the electric vehicle tax credit when filing your annual taxes.
Qualifying for Inflation Reduction Act credits and rebates
To qualify for Inflation Reduction Act tax breaks, your family's annual household income must be less than 150% of Atlanta's median income.
If your income is:
Below 80% of Atlanta's median income, you can claim:
Rebates for the full cost of appliance installations, up to $14,000
Up to $4,000 for home improvements if you cut energy usage by 20%
Up to $8,000 for home improvements if you cut energy usage by 35%
Between 80% and 150% of Atlanta's median income, you can claim:
Rebates for 50% of the cost of your appliance installations, up to $14,000
Up to $2,000 for home improvements if you cut energy usage by 20%
Up to $4,000 for home improvements if you cut energy usage by 35%
Benefits of converting to renewable energy
In addition to the tax credits for homeowners, converting your home appliances to electric has several benefits.
By replacing your fossil fuel-burning appliances with electric ones, you can:
Save money. Electric appliances are more affordable to install and more efficient than gas ones. According to ResStock, Georgia residents could save an average of $790 per year in energy costs by replacing your gas furnace with a high-efficiency heat pump. You can also save just by upgrading your system to a high-efficiency one. For example:
Upgrading from an AC with a SEER (Seasonal Energy Efficiency Ratio) rating of 14 to a SEER2 rating of 20 could save you over $1,000 in utility costs in the first 5 years. You can estimate your savings with our AC SEER calculator.
Upgrading your gas furnace from an AFUE (Annual Fuel Utilization Efficiency) rating of 81 to 97 could save you over $1,700 in utilities the first 5 years. You can estimate your savings with this AFUE calculator.
By upgrading both your AC and furnace to more efficient systems, you could save over $5,000 in the first 5 years between energy costs and tax breaks.
Go green. Burning fossil fuels emits carbon dioxide, methane, and nitrous oxide into the atmosphere, which contributes to greenhouse gasses that trap heat and contribute to global warming. Renewable energy sources don't emit gasses, which creates cleaner energy usage and a greener home.
Improve air quality. Fossil fuel emissions degrade air quality, which can worsen symptoms for people with illnesses like asthma and bronchitis. Your HVAC system can also worsen air quality if you don't have an air filtration system because it recycles the air with allergens. Since renewable energy sources don't emit gasses, they maintain better air quality in your home.
Want to Make Your Home More Energy Efficient? Call Reliable Heating & Air.
Call us today at (770) 594-9969 or schedule an appointment for a free in-home estimate.
We've been offering the most reliable HVAC service in the greater Atlanta area for more than 40 years. Our HVAC, plumbing, and electrical experts will explain your energy-efficient options to help you make tax deductible home improvements and lower your energy bills throughout the year.