What the Inflation Reduction Act Means for Homeowners - Big Takeaways That Could Affect Your Budget

One-third of homeowners are concerned about their homes are concerned about their homes being damaged by climate threats, yet many are still putting off critical home projects. More recently, this happens to be a result of high inflation rates that have driven up prices for residential home materials. These tax incentives help homeowners understand the types of home improvement tasks that support energy savings and environmentally sustainable homeownership.

Let’s dive deeper into the Inflation Reduction Act and see how homeowners can benefit from the rebates and tax credits that are included.

What the Inflation Reduction Act promises for homeowners

The act delivers savings on both large and small-ticket green home improvements.

The act is set to provide $1.6 billion in potential tax savings for homeowners in 2023 alone, up from $253 million in existing credits in 2022.

The act delivers a 30% federal tax break for rooftop solar installations for 10 years, for example. It also provides savings of up to 30% on other household amenities, like heat pumps.

And there are several other smaller-scale improvements that homeowners can finance through the program.

Taxpayers who purchase an Energy Star since-family new home can receive $2,500 in tax credit. Those buying a home that meets the Department of Energy’s Zero Energy Ready Homes program requirements can gain a whopping $5,000 in tax credit.

The act also allows up to $840 to offset the cost of heat-pump clothes dryers or electric stoves, up to $4,000 for electrical panel upgrades to support new appliances, up to $1,600 for insulation and sealing costs, and more.

On top of the tax savings, homeowners may also benefit from lower energy costs due to increased efficiencies, which will place a reduced strain on power grids and reduce carbon emissions.

What the Inflation Reduction Act promises for homeowners

The act delivers savings on both large and small-ticket green home improvements.

The act is set to provide $1.6 billion in potential tax savings for homeowners in 2023 alone, up from $253 million in existing credits in 2022.

The act delivers a 30% federal tax break for rooftop solar installations for 10 years, for example. It also provides savings of up to 30% on other household amenities, like heat pumps.

And there are several other smaller-scale improvements that homeowners can finance through the program.

Taxpayers who purchase an Energy Star single-family new home can receive $2,500 in tax credit. Those buying a home that meets the Department of Energy’s Zero Energy Ready Homes program requirements can gain a whopping $5,000 in tax credit.

The act also allows up to $840 to offset the cost of heat-pump clothes dryers or electric stoves, up to $4,000 for electrical panel upgrades to support new appliances, up to $1,600 for insulation and sealing costs, and more.

On top of the tax savings, homeowners may also benefit from lower energy costs due to increased efficiencies, which will place a reduced strain on power grids and reduce carbon emissions.

How is this act different from others?

The act essentially rewards responsible consumer behavior and incentivizes homeowners who may be feeling the pinch of inflation. While it is partly an extension of the Nonbusiness Energy Property Credit, which expired in 2021, it does more.

Now, in addition to allowing homeowners to claim up to $1,200 a year of 30% of the total cost of eco upgrades at tax time, it also pledges up to $14,000 in rebates for energy-efficient updates.

This bill promises homeowners a reward for spending more on environmentally friendly and energy-efficient home improvements an equipment. Its a nice gesture for homeowners who are definitely feeling the brunt of rising and unstable prices.

It’s also very specifically targeted to home renovations, a rarity in federal bills.

This type of law us usually passed at the state level, and for that reason, it almost feels like a state bill passed at the federal level.

Cost-effective green upgrades to consider: bigger projects

If you have the cash to front the expenditure on big-ticket items, knowing that you’ll be up for a rebate, then you’ll get more bang for your buck.

The bill has a max rebate of $14,000 per household, which will help homeowners earn a tax rebate for replacing an HVAC system, reinsulating their home, upgrading electrical panels, installing a heat-pump water heater, or installing solar panels on their roof.

Some of the most effective energy-saving upgrades include replacing old, inefficient windows and exterior doors and upgrading to major appliances that meet Energy Star or International Energy Conservation Code standards.

Cost-effective green upgrades to consider: smaller projects

If you’re not quite ready to transform your home with large-scale green investments, you can still make small changes that will have a big impact.

Install solar-power lights outdoors: They don’t require electricity and can be installed anywhere without access to electrical wiring.

Install Energy Star-certified windows: New energy-efficient windows will save you 25% to 30% on heating and cooling costs.

Use a low-flow showered: Can help you save 25% to 60% on water other bills as it reduces the dingy used to heat shower water.These usually cost around $50.

Use smart plugs: A smart plug automatically cuts off energy when a device is not used. Smart plugs start at $10 each.

Works Cited:

Willcox, Kathleen. “What the Inflation Reduction Act Means for Homeowners—Big Takeaways That Could Affect Your Budget.” Real Estate News & Insights | Realtor.com®, Real Estate News & Insights | realtor.com®, 17 Aug. 2022, www.realtor.com/news/trends/what-the-inflation-reduction-act-means-for-homeowners/.