The Inflation Reduction Act (IRA) is a legislative package passed in August 2022 by Congress and signed into law by the President. The Act aims to fight economic inflation, lower the deficit, reduce the prices of prescription drugs for seniors, and lower the country’s carbon emissions.
How does this impact homeowners, you may ask?
Below we’ve highlighted the Act’s effects and the rebates and tax breaks that homeowners may take advantage of.
Why is the IRA important to homeowners?
This new anti-inflation Act provides a benefit of up to $14,000 for homeowners who make improvements to their houses. 2022’s IRA Act aims to cut the cost of home energy use through upgrades of energy-efficient appliances and weatherizing. If all goes as planned with the Inflation Reduction Act, we can expect to reduce carbon emissions by 40% by 2030.
Here are a few ways to improve energy and cost savings in your home.
Weathering the home to stop leaks is the biggest payoff for saving money and reducing emissions. A significant contributor to high energy bills is gaps along baseboards, windows, doors, pipes, fireplaces, and electrical outlets. These areas can cause heat to leak out of your home in the winter and air conditioning to escape during the summer. Poor insulation typically leads to cranking up the heat or AC to keep the temperature more comfortable.
To see where your home may leak, do a self-inspection of common areas like windows and doors. If a leak is found, apply caulk or weatherstripping to help reduce places for air to escape.
Key Takeaway: The IRA provides 30% tax credits with a maximum of $1,200 yearly for weatherization work.
Windows are a big culprit for air loss in homes and generally are only suitable for 10-20 years. Leaky windows and doors are responsible for 25%-30% of residential heating and cooling costs. If you have an older house, it may be time for new windows!
Here are clues that it may be time to replace your windows:
- Your home feels too cold in the winter try upgrading to a double panel.
- Frames are rotting, sagging, warped, or leaking around the window.
- It’s challenging to open or closIf the windows are single pane – it’s time to upgrade to double panel windows.
Key Takeaway: The Inflation Reduction Act offers $600 for window replacement and $250 for exterior door replacement.
Electrifying a house means swapping out fossil fuel-burning appliances for ones that run on electricity.
Two benefits of making homes more energy efficient and running on electricity: help combat climate change and can save money in the long run.
Heating and cooling are typically the prominent energy suckers- here’s how to reduce those costs:
- Upgrade air conditioners and clothes dryers to electric options.
- Install new HVAC systems (although this does come with the highest upfront costs, it’ll save money in the long run).
- Use electric heat pumps to heat and cool the home.
- Upgrade the breaker box to prepare for an all-electric home.
- Invest in an energy-efficient heat pump water heater.
- Change to an electric stove, cooktop range, or oven.
Key Takeaway: All of the above changes are eligible for tax breaks.
There is a 30% tax credit for up to $2,000 to purchase and install a heat pump and rebates up to $8,000 for low to moderate-income households earning less than 150% of the local median income. A new breaker box can get you up to $4,000, and new kitchen appliances qualify for up to $840.
Other Ways to Save Money
If purchasing new items is not in the cards for you at this time, there are other things you can do to cut energy costs.
Here are other ways to cut energy costs:
- Turning out lights when not using them, especially when not home.
- Replace old light bulbs with LED lights (this does cost more upfront but saves money over time).
- Unplug appliances and electronics that are not being used. “Energy vampires guilty of using a lot of power even when not in use are TVs, cable boxes, computers, and smart appliances.
- Lower the water heater temperature, even by a couple of degrees.
- Line dry clothing when it’s a nice warm day out.
- Adjust your thermostat a degree or two during sleeping hours.
- Change the air filters in the furnace, HVAC system, and dryer vents.
- Close the blinds, especially when not home. This keeps the air from escaping through the windows.
Inflation Reduction Act for Solar
Motivation to go solar has never been higher, as the IRA has a 30% tax credit for installing solar roof panels. A solar system can run $20,000 on average, which is a significant expense up front, but it will save quite a bit in the long run.
How does this impact new homes?
NAHB (National Associate of House Builders) opposed the bill stating that it would impact the taxation of real estate and new building and energy code requirements. They are concerned the bill will “disincentivize multifamily construction, increase the cost of new homes through higher energy code requirements, and inflate labor costs.”
New housing costs are already relatively high, so the NAHB is concerned about future expenses if the states implement the new codes.
How can I get Help?
Turn Key Fabrication uses the highest quality materials to build our homes. With a focus on energy-efficient products and SIP panels, our tiny houses are already meeting many of the codes and guidelines this new Act is implementing. Contact us to get started on building your carbon footprint-friendly home today.
We just had three single pane windows replaced with double pane by Renewal by Anderson. From what I’ve read we should qualify for the $600 per window ($1,800) rebate under the IRA. My question is: how do we apply? Is this rebate part of our 2023 taxes? Thank you for your assistance. Derek