Passed during the 117th Congress by the House and Senate in early August, President Biden officially signed the Inflation Reduction Act (IRA) into law on August 16, 2022. The IRA includes the High-Efficiency Electric Home Rebate Program (HEEHRA) and the Energy Efficient Home Improvement Credit (EEHIC), which offer millions of homeowners financial incentives, including a 30% tax credit, to further electrify, insulate, install replacement windows, exterior doors, remodel and renovate their homes.
This once-in-a-lifetime congressional legislation encourages homeowners to participate in the worldwide goal of further curbing CO2 emissions to protect the environment and lower global warming while reducing energy costs and enjoying financial incentives for participating. The act will provide roughly $370 billion via rebates and tax credits to address energy and climate by switching more appliances, homes, and vehicles to electricity versus fossil fuels and conserving energy through better insulating homes, and eliminating energy leakage.
Through the IRA, and specifically, HEEHRA, the $4.3 billion program includes rebates of up to $14,000 per household. If a family doesn’t exceed 150% of the local median income as determined by the Department of Housing and Urban Development (HUD), then a household qualifies for energy-saving rebates, including up to $1,600 in rebates to better insulate and seal their home.
Those households not qualifying for rebates will qualify for the EEHIC 30% tax credit on energy-saving additions such as replacement windows or exterior doors up to $1,200 per year. These tax credits will be available each year through 2032 and the credits apply for the year in which a project is completed. Every year a new project can be started and it would qualify for the tax credit for that year. An annual cap for specific projects includes $600 for replacement windows and $500 for exterior doors, but it can be repeated each year through 2032.
The EEHIC expired on December 31, 2021, but was brought back and is better than ever. Previously, it offered only a 10% credit and a $500 maximum payout over a taxpayer’s lifetime. Now the credit is 30% and renewable each year through 2032. One caveat is that the tax credits are non-refundable, meaning a taxpayer won’t receive a refund if there is no tax liability that year. This is because tax credits, by definition, offset the tax that a taxpayer owes on their tax return each year. However, if there is no tax liability in a given year, the tax credit can be carried forward to subsequent years to reduce future tax liabilities.
Home remodeling or home renovation installations performed under the EEHIC or HEEHRA parameters are required to meet energy-saving guidelines such as being Energy Star rated. The goal is to have as many homeowners participate as possible so greenhouse emissions and wasted energy are substantially reduced over the next decade. These energy-saving programs are designed to reduce energy bills for every homeowner in the U.S. while offering financial advantages for participating.
If new energy-efficient replacement windows, better insulated and sealed exterior doors, or more insulation added to your home will improve your family’s quality of life and save energy as well, then now may be the perfect time to complete those home renovations and save money at the same time. At American Eagle Builders, we can assist with many home energy-saving renovations at discount prices to meet your budget. We would be glad to work with you on these home remodeling projects.