A Homeowner’s Guide to the Inflation Reduction Act: Details on Tax Credits and Rebates for Home Improvement
Homeowners investing in remodeling projects this year can save money based on some of the aspects of the Inflation Reduction Act that became law in August 2022. The legislation includes tax credits on certain products by reducing energy costs, increasing cleaner methods of production and reducing carbon emissions.
The Inflation Reduction Act has many aspects, but three are of particular interest to those interested in remodeling:
1. EEHIC (Energy Efficient Home Improvement Credit) Tax Credits (with restrictions on totals that can be claimed)
2. RCEC (Residential Clean Energy Credit) Tax Credits (with percentage limits but no dollar limits and no homeowner income restrictions)
3. HEEHR (High Efficiency Electric Home Rebate) Rebates (with restrictions on homeowner income)
Energy Efficient Tax Credits
As a homeowner, you may be eligible for energy efficient home improvement tax credits under the IRA’s EEHIC. Different amounts are available in different categories; tax credits from different categories can be combined. However, there is a $1,200 annual limit on the tax credits.
Beginning in 2023, the EEHIC credit was made equal to 30 percent of the costs for all eligible home improvements made during the year—up to a $1,200 annual limit—although some additional limits will apply.
- Exterior windows and skylights ($600)
- Exterior doors ($250 per door, $500 max)
- Energy audits ($150 max, per year)
- Electric or natural gas heat pump water heaters, heat pumps, biomass stoves and boilers (Up to $2000 – and for this one category, the $1200 limit may be exceeded)
Residential Clean Energy Credits
These credits apply to systems that use solar, wind, geothermal, biomass or fuel cell power to produce electricity: Solar installations could be a big opportunity for homeowners, because according to Qualified Remodeler, “The credit is retroactive to the start of 2022. This means that solar installations completed between the ten-year period from Jan. 1, 2022, and Dec. 31, 2032, should qualify for the 30 percent credit. What’s particularly unique about the credit is that there’s no dollar limit: A homeowner is entitled to the 30 percent tax break whether they are spending $25,000 or $125,000 on the residential solar system—and there is no income level restriction.”
Additional information about this tax credit can be found here.
The health and lifespan of your solar-panel system hinges on the health and lifespan of your roof. Before you get solar panels installed, read this!
High-Efficiency Electric Home Rebate
Some homeowners may also be able to take advantage of the IRA’s HEEHR program that is aimed to help lower and middle-income households (household income must be less than 150% of the state median income).
The rebates apply at the point of sale and are administered by state-level agencies (which have yet to be established). They include:
- Insulation, air sealing and ventilation (up to $1600)
- Heat pump water heaters (up to $1750)
- Heat pump for space heating or cooling (up to $8000)
- Electric stoves, cooktops, ranges, ovens, or clothes dryers (up to $840)
- Breaker box upgrades (up to $4000)
- Electric wiring (up to $2500)
For more information, visit Qualified Remodeler and Reuters.
Source: National Association of the Remodeling Industry (NARI)
Questions? Contact us at (414) 353-6910 to see what options are available to you.
