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New Laws Make It More Cost-Effective to Go Green

New Laws Make It More Cost-Effective to Go Green

In case you haven’t been paying attention to headlines about what’s going on in Congress, there is this little thing called the “Inflation Reduction Act” that recently passed both houses of Congress and was signed into law — evidently to the surprise of politicians on both sides of the aisle. While it may contain items that don’t benefit or even agree with everyone, it does contain good news for homeowners who have already made or are about to make energy-efficient improvements to their homes.

The new law includes about $900 billion in spending and tax cuts, with $369 billion to fight climate change and fund green energy projects, including home upgrades, according to Realtor’s Kathleen Willcox. “For homeowners, this means that going green at home can be as much about saving green as it is about saving the planet,” she says.

With climate threats increasingly looming large, many homeowners are looking to perform some critical home projects, but materials costs have become prohibitive. The tax incentives contained in the new legislation, however, can help homeowners with the types of home improvement tasks that support energy savings and environmentally sustainable homeownership. “The act delivers savings on both large and small-ticket green home improvements,” says Willcox, who adds that the new legislation 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. It delivers a 30% federal tax break for rooftop solar installations for 10 years, for one example, but 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 as well.

Those who purchase an Energy Star single-family new home can receive $2,500 in tax credit, while 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,” says Willcox. The result of some of these changes can be ultimately realized in lower energy costs due to increased efficiencies, which will place a reduced strain on power grids and reduce carbon emissions.

What does it have to do with inflation reduction? “The act essentially rewards responsible consumer behavior and incentivizes homeowners who may be feeling the pinch of inflation,” says Willcox. “While it is partly an extension of the Nonbusiness Energy Property Credit, which expired in 2021, it does more.” She goes on to explain how now, in addition to allowing homeowners to claim up to $1,200 a year or 30% of the total cost of eco upgrades at tax time, it also pledges up to $14,000 in rebates for energy-efficient updates. In other words, it’s an invest-more-save-more proposition for homeowners who are looking to add on environmentally friendly and energy-efficient home improvements and equipment, perhaps a nice nod of savings approval for homeowners who are definitely feeling the brunt of rising and unstable prices.

The other surprising element contained in the bill is specifically targeted at home renovations — a rarity in federal bills, according to Willcox. “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,” she says, citing how the bill has a max rebate of $14,000 per household. This can help homeowners earn a tax rebate for replacing an HVAC system, re-insulating their home, upgrading electrical panels, installing a heat-pump water heater, or installing solar panels on their roofs.

Throw in energy-saving upgrades like replacing old, inefficient windows and exterior doors and upgrading to major appliances that meet Energy Star or International Energy Conservation Code standards, and it feels like a win-win for homeowners.

Realtor, TBWS

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