November 29, 2023
Summary: The Inflation Reduction Act supercharges the financial benefits of adopting modern electric products for homeowners. We will help you navigate the complexity to take full advantage of the incentives available to you.
The Inflation Reduction Act (IRA) has introduced billions in federal incentives for homeowners aiming to make their homes more energy-efficient and environmentally friendly. This comprehensive guide focuses on the two key incentives most relevant for homeowners: the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit. These incentives not only promote sustainable living but also offer financial benefits to homeowners.
The Energy Efficient Home Improvement Credit in the Inflation Reduction Act provides a substantial incentive for homeowners who make energy-efficient improvements. If you make such improvements to your primary residence after January 1, 2023, you may qualify for a tax credit up to $3,200. This incentive resets annually, allowing claims for successive years’ projects through 2032. The credit covers 30% of certain qualified expenses.
This credit includes various components with specific limits:
Up to $1,200 in Incentives:
The credit is nonrefundable, meaning it cannot exceed your tax liability. It can be claimed annually for eligible improvements until 2033 by filing Form 5695, Residential Energy Credits, with your tax return. This opportunity enables homeowners to continuously upgrade their homes for energy efficiency while benefiting financially.
The Residential Clean Energy Credit in the Inflation Reduction Act equals 30% of the costs of new qualified clean energy property installed in your home from 2022 through 2032. This offers one of the most attractive incentives for homeowners looking to decrease their energy bill. The credit rate reduces to 26% in 2033 and 22% in 2034.
This credit is available for improvements made to your primary or secondary home in the United States, whether owned or rented. Landlords and other non-resident property owners are not eligible.
Eligible improvements include:
Subsidies, rebates, and financial incentives might need to be subtracted from the qualified property expenses, affecting the credit amount. Clean energy property must meet specific standards, such as certification requirements for solar water heaters and capacity criteria for battery storage technology.
Similar to the Energy Efficient Home Improvement Credit, this is a nonrefundable credit filed through Form 5695, Residential Energy Credits, for the tax year when the property is installed.
The Inflation Reduction Act offers substantial incentives for residential homeowners to invest in energy-efficient and clean energy technologies. Understanding these incentives and how to qualify for them is crucial for maximizing the benefits that electrification products bring to your home. Our energy advisors at Daylight will help you understand the incentives you qualify for. We also offer products that make taking advantage of these incentives simple, such as our ITC pre-buy where we purchase your tax credit upfront in exchange for a significant discount to your equipment cost.
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