The Inflation Reduction Act (IRA)
What Is the IRA?
The Inflation Reduction Act of 2022 (IRA) is legislation that was implemented to curb inflation, reduce the deficit, invest in domestic energy production, and promote clean energy. In fact, $369 billion of the IRA is devoted to investing in clean energy sources such as solar, wind, and hydroelectricity, while developing technologies that increase energy efficiency.
Homeowners throughout Colorado Springs and beyond stand to benefit from this historic act by claiming point-of-sale rebates on the purchase of new energy-efficient HVAC systems. If you plan on replacing or upgrading your air conditioner, furnace, or heat pump before 2031 (the year that IRA rebates expire), we at Brown’s Heating & Cooling can help you choose a system that will take advantage of these rebates.
What Do the Rebates Cover?
There are two rebate programs: the High-Efficiency Electric Home Rebate Act (HEEHRA) and the Home Owner Managing Energy Savings (HOMES) program.
HEEHRA provides low to median-income households with up to $14,000 in rebates related to electrification projects. Families can qualify for up to $8,000 for an all-electric ENERGY STAR heat pump for home heating and cooling. They can also qualify for up to $1,750 on a heat pump water heater. Additional rebates are available for electric appliances, insulation, air sealing, and electric wiring.
HOMES provides low to median-income households with up to $8,000 in rebates and high-income households with up to $4,000 to make their homes more energy efficient by cutting their energy usage by at least 35%. Services can include insulation, air sealing, heat pump/HVAC upgrades, and more. These performance-based incentives are based on your home’s actual energy savings after installation.
How Do I Get My Rebates?
The rebate programs will be overseen by each state’s energy office. Before the rebates take effect, states will need to apply for funding and determine how to implement the programs at the state level. The Department of Energy (DOE) is expected to issue state guidelines in spring 2023. However, it could take 12-24 months for the funding to be available.
While states wait to learn the details of how the rebates will be implemented, closer on the horizon are tax credits. Tax credits differ from rebates in that they don’t reduce the up-front purchase price of an upgrade or new system. Instead, they’re claimed when your taxes are filed.
Efficiency Upgrades
The 25C residential energy efficiency home improvement tax credit has already been around but the IRA extended it until 2032 and increased the credit to 30% of the total installation costs. That means homeowners can get up to 30% back, up to $1,200 per year, for energy-saving renovations such as adding insulation to their homes or replacing exterior windows for more energy-efficient models.
It’s important to keep in mind that for the most part, the HEEHRA and HOMES rebates can’t be combined with one another. However, an additional benefit of the 25C tax credit is that it can be combined with either HEEHRA or HOMES.
Remember that the IRA was implemented with the goal of increasing homes’ energy efficiency. Homeowners can receive tax credits by installing high-efficiency windows, doors, water heaters, appliances, and energy-efficient HVAC systems (including furnaces, boilers, and central AC).
For more information on how you and your Colorado Springs home can benefit from the Inflation Reduction Act, contact Brown’s Heating & Cooling today. Don’t let the weather get you down, call Brown’s.