Upgrading your home’s energy efficiency is about to get a lot more affordable thanks to the Inflation Reduction Act of 2022 (IRA). The new tax, climate, and healthcare law allocates billions of dollars to tax credits, rebates, and incentives that will help homeowners take on energy-saving home improvement projects, including new window and door installation, attic insulation, air sealing, and more.
Today, we’re going to break down some of the best IRA tax credits and incentives, and tell you how you can take advantage of them to save energy and money at your Michigan home as more incentives become available in 2023.
Get a 30% Tax Credit for Qualifying Energy Efficiency Home Improvements
One of the most notable aspects of the Inflation Reduction Act is the reinstatement of a tax credit you might not be familiar with, the Nonbusiness Energy Property Credit (aka the energy tax credit), which had expired at the end of 2021. The Inflation Reduction Act of 2022 revived the credit, increased it, and gave it a new name: the Energy Efficient Home Improvement Credit.
The old Nonbusiness Energy Property Credit was worth just 10% of the cost of energy efficiency improvements like new insulation and air sealing, and was limited by a $500 lifetime cap. Starting in 2023, the new Energy Efficient Home Improvement Credit will be worth 30% of the total installation costs for qualifying energy efficiency improvements, and the $500 cap will be replaced by a cap of $600 per measure with an annual limit of $1,200 (some exceptions apply and are noted below).
Home improvement projects that will qualify for the 30% energy tax credit include:
- Air sealing
- Home energy audits ($150 credit)
- Energy efficient windows
- Energy efficient entry doors ($500 credit)
The 30% energy efficiency tax credit will be available starting in 2023 until 2032. The tax credit has also been made retroactive to 2022 but at its original 10% value.
Get Up to $14,000 in Rebates for Energy-Saving Home Improvements
The Inflation Reduction Act has so far created two new rebate programs for energy efficiency upgrades:
- HOMES (Home Owner Managing Energy Savings) Rebate Program
- High-Efficiency Electric Home Rebate Program
Both rebate programs offer upfront savings on eligible efficiency improvements, but cannot be combined with other federal grants or rebates.
The HOMES Rebate Program covers retrofit services including insulation and air sealing. To be eligible for the $4,000 rebate, you must demonstrate modeled energy savings of 35% or more.
The High-Efficiency Electric Home Rebate Program was designed for low and moderate-income families. It offers a maximum rebate of $14,000 for energy efficiency services and all-electric appliances.
While the creation of these rebate programs is exciting, they are not available yet and won’t be until 2023 at the earliest. Individual states will be responsible for applying for and distributing the funds made available by these rebate programs. Each state still needs to determine how it will use rebate programs, when they will go into effect, and how residents will be able to take advantage. More information will be available in 2023.
Save on Home Upgrades with WMGB Home Improvement
WMGB Home Improvement is your local expert for insulation services, air sealing, energy audits, and window and door upgrades for energy efficiency. We’ve been in business since 1984 and have helped thousands of homeowners in Western Michigan lower their energy costs with our home performance services. Our expert team can help you take advantage of IRA tax credits and rebates so you can save money on the upgrades your home needs the most!