How can the Inflation Reduction Act benefit you?

The passing of the Inflation Reduction Act (IRA) has unlocked many benefits for homeowners and the clean energy community at large. The bill carries $369 billion dollars in investments to curb greenhouse gas emissions and promote the clean energy transition as well as critical environmental justice efforts.IRA includes lucrative tax credits and rebates designed to benefit Americans in every zip code. As succinctly explained by EcoWatch, a tax credit is a dollar-for-dollar reduction in the amount owed in taxes in a given year. If a customer’s credits exceed their tax bill, they can carry forward credits to future years to still get their full value.

The IRA increases the tax credit for residential solar and battery storage to 30% of the installed cost through 2032 (wage and apprenticeship requirements are required for projects over 1MW). Stand alone battery storage is also now eligible for the 30% tax credit as long as the battery capacity is at least 3 kWh. Furthermore, this 30% tax credit has the potential to be stretched up to 60% credit if the solar/storage installations meet domestic content requirements, are located in energy communities and/or benefit low income populations.

Notably, the IRA also expands theEnergy Efficient Home Improvement credit through 2032. The Energy Efficient Home Improvement credit allows households to deduct from their taxes up to 30 percent of the cost of upgrades to their homes, including installing heat pumps, insulation and, importantly, upgrading their breaker boxes to accommodate additional electric load. The tax credit amount is mostly limited to 30% of the project cost, and increases the previous lifetime cap of $500 to an annual cap of either $1,200 to $2,000 depending on the efficiency improvements. This means homeowners will be able to claim credit for more projects, especially if they are spread out over multiple years.

IRA also introduces many rebates in the form of partial or full refund of the cost of high efficiency equipment or upgrades. Various programs are available for all income levels although there are additional incentives available for low and moderate income households. For example, rebates are up to 50% of the cost for households with income of 80–150% of the Area Median Income (AMI), and up to 100% of cost for those under 80% of AMI. There are maximum incentives for each type of equipment as well as a $14,000 per household cap.

Investing in home energy improvements can translate into an estimated $1800 of annual savings, as calculated by Rewiring America, for customers who install a modern electric heat pump to replace their furnace, a heat pump for water heating, an electric vehicle and solar.

Thus, if you are a customer who wants to benefit from these savings and build the future grid, this might be your decade to transition fully to smart and efficient home technologies and, if you haven’t done so already, build your solar and storage powered resiliency. If you’re wondering what credits and rebates you qualify for, we recommend using the calculator developed by EcoWatch here. If you’re interested in adding solar, battery storage or EV charging perhaps we can help you! Please don’t hesitate to reach out to Swell representatives here.

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