By Bob Ciesielski, Atlantic Chapter Energy Chair
Last year, Sierra Club members supported the Federal Inflation Reduction Act (IRA) as a means to reduce greenhouse gas emissions and lessen the effects of climate change. The law addresses two major sources of greenhouse gas emissions: transportation and heating and cooling systems in homes by helping electrify cars and homes and promoting energy efficiency. The Act’s major tax credit provisions took effect January 1, 2023. While eligibility for tax credits has begun, billions of dollars of upfront rebates and potential refunds will become available later this year.
The IRA tax credits available to homeowners are generally set at 30%, subject to certain limitations. The value of the tax credits depends on the amount you owe in federal income taxes, but will not get you a refund if you owe nothing. Much of the information in this article has been made available through the New York Times interactive article “This Guide Can Help You Save Money and Fight Climate Change” by Nadja Popovich and Elena Shao published February 1, 2023, which discusses the seven major tax credits, as follows:
Home Energy Audit – Evaluation of your home by a licensed professional can help identify whether the house is losing energy and what you can do to reduce heating and cooling bills. The IRA provides a tax credit of 30% of the cost of an audit, up to $150.
Install Solar Panels or Other Renewable Energy Sources – The IRA will provide a 30% tax credit with no cap on the total purchase price for rooftop solar panels, wind turbines, geothermal heat pumps, and stand-alone batteries to store electricity from renewable sources. The credit can include the cost of labor, permits and inspections. This credit applies retroactively to projects completed in 2022, except for battery storage units.
Make Energy Saving Renovations and Purchase Appliances – High efficiency water heaters, central air conditioners and boilers are covered by the IRA tax credits, and also home improvements like adding insulation, sealing air leaks, and installing more efficient exterior doors, windows and skylights. The 30% tax credit covers the cost of certain appliances that meet energy certification requirements, up to a credit of $600 per item. The credit can also cover other home efficiency upgrades, up to a maximum of $1,200 for insulation, $500 for doors, and $600 for windows and skylights. There is an annual limit of $1,200, which includes the $150 home energy assessment credit.
Heat Pumps – Heat pumps for heating and cooling, and heat pump water heaters qualify for a 30% tax credit of up to $2,000 per year. (This amount is in addition to the $1,200 available for tax credit for other energy saving renovations and appliances.) Heat pump options should be researched, as they include geothermal heat pumps, air-to-air heat pumps, and whole climate air-to-air heat pumps.
Install an Electric Vehicle Charger in a Rural or Low-Income Area – This tax credit is 30% of the cost of the charger, up to $10,000. Households in rural or low-income census tracts may apply for this credit.
Buy a New Electric Car, Pickup Truck or SUV – Federal tax credits for new electric vehicles can be claimed up to $7,500 in value. It should be noted there is a $55,000 price cap on new cars and sedans and an $80,000 price cap on trucks, SUVs and vans. This credit is available to single taxpayers who make $150,000 or less, heads of households making $225,000 or less, and joint taxpayers making $300,000 or less. (Remember, a New York State Drive Clean Rebate of up to $2,000 is also available in addition to the Federal credit.)
Purchase a Used Electric Car, Pickup Truck or SUV – The IRA tax credit is available up to $4,000 or 30% of the vehicle price, whichever is lower, up to a maximum vehicle price of $25,000. This credit is available to single taxpayers who make $75,000 or less, heads of households making $112,500 or less, and joint taxpayers making $150,000 or less.
All these tax credits are currently available through the end of 2032, and some will be available at a reduced savings thereafter. Future articles will discuss direct rebates available from NYS and upcoming federal IRA. rebates once announced. For instance, NYSERDA currently has a rebate program available for geothermal and air-to-air heat pumps - including cold weather heat pumps which are operational and reliable in Northern New York and Maine.