Later this year, a wave of energy-efficient upgrade rebates is set to launch, promising substantial savings on home renovation costs for numerous American households. These rebates, part of a federal program worth $9 billion authorized by Congress through the Inflation Reduction Act last summer, are anticipated to offer considerable financial relief.
Under the program, buyers opting for energy-efficient upgrades will qualify for rebates ranging from several hundred dollars for individual items like electric cooktops and dryers, to substantial sums of up to $8,000 for the installation of heat pumps or achieving a remarkable reduction of 35% or more in home energy consumption. Homeowners contemplating such renovation projects are advised to time their endeavors to coincide with the program's commencement.
The precise amount of these rebates will fluctuate based on factors such as household income and geographical location, as each state will individually administer the program. Specific details are expected to be unveiled by states in the forthcoming months, aligning with guidelines set forth by the Energy Department in July. Notably, these rebates can be combined with existing tax credits and utility incentives for technologies like heat pumps, solar installations, and electric vehicles, according to insights shared by Kara Saul-Rinaldi, a clean-energy policy strategist based in Washington, D.C. Both the new rebate programs and augmented tax credits are slated to remain effective until 2032.
Photo courtesy: by Ashlea Ebeling, WSJ
The primary goal of these rebates is to drive greater adoption of energy-efficient technologies in homes, a mission that gains significance amid escalating temperatures and extreme weather events that escalate the expenses associated with cooling, heating, and powering residences. The National Energy Assistance Directors Association forecasts an 11.7% national increase in average household energy costs during the months of June, July, and August, compared to the previous year. Additionally, these rebates aim to counteract the inflation-driven rise in renovation costs, as observed by energy policy analysts.
Low-income households, defined as those earning less than 80% of the median income in their area, could potentially secure rebates of up to $22,250, effectively covering the entire cost of energy efficiency enhancements, notes Saul-Rinaldi.
Meanwhile, households categorized as moderate-income, falling between 80% and 150% of the area median income, may be eligible for incentives as high as $19,000 for a project valued at $32,000.
For higher-income households, rebates of $7,200 are conceivable for comprehensive home performance retrofits, combining $4,000 in rebates and $3,200 in tax credits. (In areas like Los Angeles County, a family income at 150% of the median equates to $147,300.)
Strategizing for Optimal Savings: A Step-by-Step Approach
A massive heat dome across the American Southwest is driving temperatures in Phoenix and Las Vegas to record triple-digit highs. New Maxar satellite photos show how the growth of these cities is contributing to the crushing heat. Illustration: Luca Depardon | SEE SOURCE
📌 Initiate with a Thorough Home-Energy Audit
To embark on the journey towards enhanced energy efficiency and electrification, homeowners are advised to begin with a home-energy audit, as recommended by Saul-Rinaldi. This audit will be a prerequisite for accessing the new rebate program aimed at overall energy reduction. The Internal Revenue Service's recent guidance stipulates that the audit must pinpoint the most impactful and cost-effective energy-efficiency upgrades, including projections of energy and cost savings for each enhancement. Homeowners undertaking an audit this year can consequently devise a comprehensive plan to align with the upcoming state rebates.
📌 Maximize Savings through Staggered Home Improvements
Cynthia Adams, who acquired a 1959 ranch-style dwelling in Durango, Colo., last year, has been strategically plotting her route to harness federal and state incentives for a complete transition to electric utilities. Her approach involves a series of steps, starting with the replacement of appliances with Energy Star-rated models, which earned her a $40 utility rebate and a $100 tax credit. Future plans encompass insulation and air sealing for the attic and crawl space, alongside the installation of a new heat-pump heating and cooling system, followed by a solar energy solution. Anticipating a $2,000 rebate through the new home-retrofit program, Adams also looks forward to leveraging a federal tax credit of up to $2,000 for the heat pump, coupled with a local electric co-op's $1,000 heat-pump rebate. The solar tax credit, equivalent to 30% of the project cost, further contributes to her savings strategy.
Cynthia Adams hopes to make her 1959 ranch-style house in Durango, Colo., fully electric.PHOTO: CYNTHIA ADAMS
📌 Harness the Power of Apps for Efficient Financial Planning
Navigating the complex landscape of green incentives has become increasingly intricate, prompting the emergence of innovative apps designed to assist homeowners in unraveling the intricacies. Pearl Certification's Green Door app, for instance, serves as a guiding tool for homeowners embarking on high-performance renovations, from selecting contractors to locating rebates specific to one's home address, and documenting improvements.
Similarly, Rewiring America's Inflation Reduction Act calculator simplifies the process by allowing users to input their family income and ZIP Code, generating a list of available upfront rebates and tax credits.
📌 Leveraging the Energy-Efficient Home-Improvement Tax Credit
With the revamp of tax credits, homeowners are eligible for up to $1,200 for insulation and similar upgrades, and up to $2,000 for heat pumps, calculated at 30% of the project cost. A significant advantage of tax credits is that they directly reduce the tax bill by an equivalent amount. This credit is renewable annually, enabling homeowners to claim it for various upgrades across different years. Those who undertake improvements in 2023 can utilize IRS Form 5695 during the subsequent tax filing year. However, it's important to note that tax credits cannot exceed one's tax liability, nor can any excess credit be carried forward to subsequent tax periods.
📌 Enhancing Property Value for Future Resale
Craig Foley, a Realtor based in Melrose, Mass., embarked on an electrification remodel of his circa 1895 Victorian house with the aim of augmenting its market appeal. Commencing his renovation in 2021 by fortifying the building envelope and enhancing insulation, Foley secured $10,700 in state rebates for installing two heat pumps—one for climate control and the other for heating water. His upcoming plans include the installation of an electric vehicle charger for his plug-in hybrid Subaru Crosstrek, alongside solar panels to achieve nearly net-zero energy consumption. Foley's aspiration to position his house competitively in a dynamic market underscores the significance of these incentives in reshaping the real estate landscape.
Craig Foley is making his circa 1895 Victorian in Melrose,
Mass., more energy efficient in part to make it more
marketable.PHOTO: CRAIG FOLEY
“I want it to compete in a changing market when we decide to sell,” he said.
The Wall Street Journal; By Ashlea Ebeling
(DISCLAIMER: Please note that the rephrased article retains the key information and context of the original article while presenting it in a different wording and structure.)
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