President Biden’s Anti-Inflation Act goes into effect Climate change by helping Americans reduce their carbon footprint. A key element in this push is offering up to $14,000 in rebates and tax credits for people to make their homes more energy efficient.
These benefits can be used to reduce the cost of home improvements ranging from installing heat pumps to purchasing new electrical appliances such as ovens and dryers. About 40% of CO2 emissions come from buildings, so such incentives could help the U.S. meet its goal to cut fossil fuel emissions, said Lauren Urbanek, deputy director of the clean buildings team at the nonprofit Natural Resources Defense League.
“This gives people some very tangible and generous incentives to do this, both in the form of tax credits and direct cash returns,” Urbanek told CBS MoneyWatch. “This is the largest federal investment in buildings ever, at least one specified for climate change.”
Here’s what you should know about the incentives.
What discounts can I get?
According to NRDC, there are two separate rebate programs.
- The HOMES discount program: This provides more than $4 billion to the states to help residents make their entire homes more energy efficient. The program offers discounts based on the energy savings that their upgraded home will achieve. For example, homeowners who make changes that reduce their energy use by at least 35% can receive up to $4,000 in rebates. That amount is doubled for low- and middle-income households, who can receive up to $8,000 in rebates.
- High Efficiency Home Reduction Act (HEEHRA): This offers low- and middle-income families discounts for electrifying their homes, e.g. B. by installing heat pumps or electric tumble dryers. The rebate per household is capped at $14,000 and households cannot receive two rebates for the same upgrade. For example, if they take advantage of a HOMES rebate program for a heat pump, they cannot also receive a rebate through HEEHRA.
What types of upgrades are covered?
The HOMES rebate program would cover upgrades, from solar panels to new windows, that help make your home more energy efficient.
By law, the HOMES rebate should be available for whole-home energy-saving retrofits that begin after the Inflation Mitigation Act goes into effect on August 16, 2022 and complete before September 30, 2031. However, because the program is not up and running, details on how the discounts can be claimed retrospectively are not yet known.
The HEEHRA program provides discounts for the purchase of certain devices and other upgrades. One of the most attractive discounts is a provision offering up to $8,000 for heat pumps, which, despite their name, provide both air conditioning and heating.
When it comes to energy use, these devices are often better alternatives to stoves because they rely on electricity rather than gas or oil to heat a home. Compared to electrical resistance heaters like baseboard heaters, they can reduce electricity consumption by about 50%, according to the Department of Energy.
From $4,000 to over $7,000 each, heat pumps can cost a pretty penny. The two rebate programs can help offset some or even all of the cost of these devices for many consumers.
Here are the discount caps for other upgrades made through the HEEHRA program:
- $1,750 for a heat pump water heater
- $8,000 for a heat pump for space heating and cooling
- $840 for electric ranges, hobs, stoves, ovens, and clothes dryers with electric heat pumps
- $4,000 to upgrade an electrical load service center
- $1,600 for insulation, airtightness and ventilation
- $2,500 for electrical wiring
There is a $14,000 cap on dollar rebates offered under the program. For example, low-income homeowners can cover up to 100% of electrification projects — up to a cap of $14,000 in rebates — while middle-income consumers can cover up to 50% of their costs through the rebates (also up to that amount). cap of $14,000).
To qualify for HEEHRA, you must earn 150% or less of the area median income as determined by the Department of Housing and Urban Development.
However, it is unclear if HEEHRA discounts will be applied retrospectively as these are set up as point-of-sale discounts. The Inflation Reduction Act stipulates that the funds will be available until September 30, 2031.
What types of tax credits can I get?
Tax credits are different from rebates because consumers receive them when they file their taxes. Discounts, on the other hand, are often applied when someone buys an item. The HEEHRA rebates are intended to be available at the point of sale, for example when a consumer buys a heat pump through a hardware store.
The Inflation Mitigation Act expands a homeowner’s tax credit called the Energy Efficient Home Improvement Credit. This covers up to 30% of energy upgrade costs, with a cap of $1,200 per year.
This tax credit used to be available to homeowners, but it was a lifetime credit, meaning you could only claim it once. But the IRA makes the loan an annual incentive, meaning homeowners can use the loan to upgrade windows one year and buy a heat pump the next.
How can I register for these programs?
You can’t claim the rebates or tax credits just yet, Urbanek noted.
“We’ll probably need a few more months to get the programs live,” she said, adding that the HOMES rebate program is being run by states that are likely now working to implement their plans.
Likewise, the point-of-sale discounts aren’t available for consumers just yet, but stores should know details later this year, according to trade publication Clean Technica.
The programs probably have different rules about this
What should I prepare now?
There are two steps homeowners can take now to prepare, experts say. First, schedule an energy audit of your home, which typically costs around $400 and, according to Home Advisor, can provide guidance on how to make your home more efficient.
Second, start talking to contractors to target them on projects when the rebates and tax credits become available, Urbanek noted.
“Educating yourself about the types of devices and what might be required for your own home can give people an idea of what to do once they become available,” she said.