Understanding the Inflation Reduction Act; Incentives and Rebates for Residential Improvement.
In August of 2022, President Joe Biden signed the Inflation Reduction Act marking the largest single investment in clean energy and climate change adaptation in US history. The historic bill unlocks rebates and tax credits for residential, commercial, and municipal entities. Although the act doesn’t come close to addressing the most pressing problems with climate change, it makes a significant investment in improving infrastructure and the built environment by offering rebates and incentives to make homes more energy efficient, to install clean energy or EV chargers, and to conduct home energy audits.
The act has a couple of main functions. First, it provides $200 Billion in tax incentives to corporations. These incentives are meant to stimulate private investment in clean energy technologies with most tax incentives covering no more than 40% of total project costs. An additional $43 Billion is invested into consumer focused tax incentives that will be explored later. Another $12 Billon is set aside for the Department of Energy to provide grants and other funding sources to upgrade, repurpose, and replace America’s aging energy infrastructure; much of which has not been changed since the country was electrified over 100 years ago. Funding from the IRA also complements funding appropriated through the Bi-Partisan Infrastructure Law (BIL) passed earlier in 2022.
Finally, $108 Billion was invested to make healthcare more affordable. This come in the form of allowing Medicare to negotiate prescription drug prices, repealing the drug rebate rule, placing an inflation cap on certain medications, expanding part D coverage and expanded ACA subsidy. While the bill spends $500 Billion over the next 10-15 years, many of the measures will also generate revenue for the federal government. The projected revenue is $737 Billion which will effectively reduce the deficit by -$237 Billion.
There are a variety of consumer tax rebates and incentives for upgrading home appliances, installing renewable energy, purchasing an electric vehicle, and more. Below is an attempt to summarize the incentives available to consumers. However, if you or a family member is seriously interested in learning more and taking advantage of these incentives you should visit https://www.cleanenergyresourceteams.org/inflation-reduction-act-what-you-need-know
Purchasing a new Electric Vehicle or Plug-In Hybrid that meets the requirements (most ev’s currently sold do meet requirements. Tesla is the main manufacturer that no longer qualifies) will earn a tax credit of $7,500. You can also qualify for a $4,000 tax credit for purchasing a used EV or PHEV that was built 2 years prior to the purchase year and has a price of less than $25,000. Ottertail power also offers a $400 rebate for installing a home charging system.
There is a $150 credit that can be used to conduct a home energy audit. Conducting a home energy audit to be a good place to start to learn more about which appliances would be best to upgrade.
There are a number of tax credits and rebates for installing more energy efficient appliances and thermal comfort systems. As mentioned above a home energy audit could help direct homeowners to which appliances would be best to replace to reduce overall energy use long term. Tax credits of up to $3,200 can be claimed now through 2032 with an annual limit of $1,200. Heat pumps are specifically capped at a $2,000 annual cap. The credit amount is determined by the overall cost of the project or improvement and 30% of the overall cost. There are also a number of instant rebates that will be available at point-of-sale later in 2023 when the Department of Energy comes out with their official guidance. These rebates will be available to housholds that make up to 150% of the local household median income. In the case of Stevens County, households making less than $98,254. Additionally the program stipulates that individuals or households that make 80% or less than the median income will qualify for 100% of costs to be covered. This means that households making less than $52,402 can qualify for full coverage via a rebate. Approximately $14,000 is available for energy efficiency and heat pump rebates. The most notable of these rebates is a $8,000 rebate for adding a heat pump powered heating and cooling system. The systems are often called mini-splits which are ductless. There are also ducted options if your home has existing ductwork for a natural gas furnace. $4,000 is available to upgrade the breaker box/ home energy control center. There is also $840 for a heat pump clothes dryer and $1,750 for heat pump water heaters. Finally there is $1,600 available for improved weatherization via increased insulation, air sealing, and more efficient ventilation.
Residents can also qualify for a 30% tax credit on solar installations which reduces the lengths of ROI.
The IRA provides significant benefits for private entities, local governments, and corporations. It will decrease the federal deficit by over $200 Billion over the next decade and make crucial upgrades to the country’s electrical grid and change how Americans use energy.
My position with the City of Morris is funded through a grant from the ENRTF. To learn more, head to https://www.legacy.mn.gov/environment-natural-resources-trust-fund
