A wave of environmental tax credits has just come into effect thanks to last year’s Climate Act. From solar vehicles to electric vehicles, here’s how you can save thousands of dollars.

Solar panels on the roofs of a residential complex in Folsom, California, Wednesday, February 12, 2020.

Solar panels on the roofs of a residential complex in Folsom, California, Wednesday, February 12, 2020.Rich Pedrocelli, File/Associated Press

  • The Inflation Control Act included some environmental incentives that came into effect on January 1.

  • The bill includes tax credits for electric vehicles, solar panels and home energy upgrades.

  • Americans could save thousands by making their homes more efficient while claiming tax breaks.

The Inflation Reduction Act – a major Democratic tax, climate and health bill passed by Congress last year – contains a plethora of environmental initiatives that many Americans can benefit from right at home.

These initiatives include ten years of tax breaks for consumers to make homes more sustainable and energy efficient, as well as incentives to buy electric or hybrid vehicles. Some of the measures went into effect when President Joe Biden signed the bill in August, but more took effect or were extended on January 1.

Here are some of the green bill initiatives and tax credits that Americans can start using at home today.

Installing solar energy

Households that equip their homes with rooftop photovoltaics can receive a tax credit to cover 30% of installation costs, effectively reducing the cost of a photovoltaic installation by thousands of dollars. To take advantage of the tax credit, you can install solar energy on your property, for example by hiring a licensed solar installer certified by an organization such as the North American Board of Certified Energy Practitioners.

Thirty percent of everything you spend on the installation – including labor, solar panels, energy storage devices and other equipment – can claim a federal tax credit. According to the Center for Sustainable Energy, the average size of a home solar system is 5kW, which costs about $20,000. At that price, the deductible tax credit would be $6,000.

The solar tax credit is set to run until 2032, when it will be lowered, and then expire in 2035 unless Congress renews it.

Insulation and weather conditions

There are several ways to make your home more energy efficient while saving money on heating and cooling, including sealing windows and doors, improving insulation and replacing your gas furnace with an electric heat pump. The first step is to do an energy audit of your home to find out what it needs.

A home energy audit — also called a home energy assessment — involves having a professional assess how much energy your home is using and where there are any inefficiencies that can be improved. The auditor will then recommend further steps. An appraisal can cost anywhere from $100 to $600, depending on the size and location of your home. Alternatively, you can do a do-it-yourself home energy assessment.

Effective January 1, a household can claim a tax credit of up to $150 for an energy audit conducted by a professional inspector. Any upgrades made after the assessment, such as adding insulation or performance windows and doors, can claim a tax credit of up to 30% of the total cost, up to $1,200.

Replacing a gas furnace with a heat pump

According to the RMI, more than 10% of US carbon emissions come from gas and fuel oil used for heating and cooking. But heat pumps, which move cold air from one place to another, can be up to four times more efficient than a gas stove. RMI said that by 2020, 99% of US homes could reduce their carbon emissions by replacing a gas furnace with a heat pump.

Under the IRA, households that install a heat pump can claim a tax credit of 30% of the total purchase and installation cost, up to $2,000.

Low- and middle-income households can benefit even further by receiving rebates that can reduce the cost of a heat pump by up to $8,000. And if electrical upgrades are needed to install heat pumps, households can get up to $4,000 in rebates. These rebate programs vary by state and may be implemented by utilities or a state agency, so you’ll need to research your state’s specifics.

Buying an electric vehicle

Incentives to buy new or used electric vehicles have also been strengthened in the new Climate Act.

For new vehicles, individuals earning less than $150,000, households earning $225,000, or co-owners earning less than $300,000 may qualify for a tax credit of up to $7,500. Vehicles must be made in the USA and cost no more than $80,000 for trucks, vans and SUVs, or no more than $55,000 for others such as sedans. The IRS has compiled a tentative list of models that would qualify.

For the purchase of a used electric vehicle, eligible income households can get a tax credit of up to $4,000 as long as the vehicle is at least two years old and costs less than $25,000.

Read the original article in Business Insider

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