And new federal incentives are on the way, which brings us to the Inflation Reduction Act. Here’s how to take full advantage of what it has to offer.
Discounts for low income people
New federal law includes home rebate program that can help middle- and low-income Americans afford energy-efficient appliances such as heat pumps and induction cookers and other improvements like air sealing and insulation.
These discounts are also available to landlords and businesses, governments, or non-profit organizations carrying out projects on behalf of low-to-middle income tenants. They’ll be available at the point of sale, so you won’t have to wait months to get your money back.
If your household income is less than 80% of the median income for your area — in Boston, a single person earning $78,550 or less would qualify, or a couple earning $89,750 or less in total — you can apply for a refund 100% of the cost of upgrades, up to a cap of $14,000. Households earning between 80 and 150 percent of their area’s median income are eligible for reimbursements of half their cost, up to $14,000.
There are overall caps for each upgrade – $8,000 for a heat pump, for example.
It is not yet known when the incentives will be available. They will be administered by the state governments, who must have their plans approved by the federal government. Sam Calisch of the nonprofit Rewiring America, which helped draft the bill’s language, said he expects that to happen next year.
The law doesn’t specifically say whether the program will apply retroactively to upgrades made in 2022 – but advocates say they don’t think that’s likely.
Tax credits too
Higher-income households can also get rebates for appliances and other improvements through the federal government. tax credits.
The Inflation Reduction Act creates a new and improved version of a program that expired last year. It is available for the whole of 2022, including retroactively, and will remain in place until 2033.
This year, you can get a tax credit for 10% of the cost of appliances and upgrades, such as efficient water heaters, heat pumps, central air conditioning, furnaces and hot water boilers, as well as other improvements like insulation and efficient windows. and doors. There are caps on how much you can receive for each upgrade and a program-wide total limit of $500.
But to save even more, wait a few months.
Starting January 1, 2023, you can recoup 30% of the cost of qualifying home improvements. And the credit will be expanded to cover energy audits and upgrading of electrical panels.
There will be caps for each type of project — $600 for most devices — and an overall annual limit of $1,200 in total. However, this overall cap does not include heat pumps and heat pump water heaters. On these, you can recover 30% of the cost of purchasing and installing the device, with an annual limit of $2,000, or half of the total cost of a project, whichever is less. .
With tax credits, the amount of money you can receive depends on your tax burden. So, if an upgrade is eligible for up to $2,000 in credits, you need at least that amount to receive the full amount of the incentive.
Theoretically, these incentives can stack, which means, for example, people with qualifying income could get a rebate of up to $8,000 for heat pumps. and up to $2,000 in tax credits for them.
“Nothing in the law precludes that,” said Lisa Frank, executive director of the Washington Legislative Office for the nonprofit Environment America.
But Calisch said that in practice, if you qualify for the home rebate program, your income is likely low enough that you have a small tax debt, so you probably can’t recoup a lot of credits.
Another tax credit program extended by the Inflation Act, which was due to expire in 2024, will from next year allow homeowners to deduct up to 30% of the cost of transitioning to heating and renewable energy, including rooftop solar and geothermal heat pumps, and, for the first time, battery storage. This drops to 26% in 2033 and 22% in 2034.
These credits can also be applied retroactively for 2022.
Renters, apartment dwellers and others who cannot install renewable energy can use the credit to subscribe to a community solar project.
And there’s more. . .
The Inflation Act includes an additional rebate program that could also save you money on appliances. But hang in there, because it’s complicated.
The HOMES rebate is designed for complete home renovations – multi-stage plans to renovate homes with the aim of reducing energy consumption, which may include insulation, replacing appliances and making other improvements . The amount you can save is based on how much energy your upgrades save overall.
For single-family homes, a 15-20% reduction in energy use during a retrofit can earn you up to $2,000 per kilowatt hour of energy saved, or 50% of the project cost, depending on the amount the lowest. By reducing energy consumption by more than 35%, you can get up to $4,000.
There is no income requirement for these repayments, but for low- and middle-income households, the caps go up to $8,000.
There are also discounts for multi-family homes and landlords.
You cannot get discount through HOMES and another federal grant or rebate for the same upgrade. So if you use this program to reduce the cost of, say, a heat pump, you also cannot claim the credit of up to $8,000.
States also administer this reimbursement program. It should be in place next year, and it is not expected to apply retroactively.
So how much can I save?
Rewiring America has created a calculator on its website, rewiringamerica.org, to help you figure it out.
What about government rebates?
Massachusetts also offers homeowner and renter discounts through the Mass Save program. Savings are especially high for low-income residents, who can ask the state to cover 100% of the cost of all eligible upgrades, but even affluent state residents can benefit from some savings, including $10,000 on a heat pump if it completely replaces fossil fuels. .
It’s not guaranteed that you can get both federal and state money for the same project, but the inflation law doesn’t rule it out.
You can use state rebates for appliances, including heat pumps, washing machines and, starting this month, induction cookers, as well as other measures such as energy-efficient lighting. energy saving.
To see what savings you’re eligible for, check out the Mass Save website.
Where to start?
To get started, consider doing a home energy audit – an assessment of your energy usage. It’s free under the state’s Mass Save program and also covered by the new federal government. tax incentives. Then seal and insulate your home to reduce the amount of energy needed to heat and cool it, said Ben Butterworth, senior director of climate and energy analysis at the Acadia Center, a clean energy advocacy organization.
Check your home’s equipment and heaters. Theoretically, if you’re trying to reduce as much carbon as possible, a good rule of thumb is to prioritize removing the biggest greenhouse gas polluters from your home and work from there – heating. space, then water heating, then appliances like stoves and clothes dryers. , Butterworth said. But most people find it more convenient to upgrade as older equipment wears out.
“If your furnace is 20 years old, you need a plan for what you’ll do when that furnace goes out,” Butterworth said.
As you develop your plan, determine if you will need to upgrade your electrical panel to accommodate more electricity.
While you’re at it, you might consider switching to renewable energy, such as adding solar power to the roof. Contractors can help you determine the size of a system you will need based on your energy consumption. If rooftop solar isn’t an option for you, you might consider subscribing to a community solar farm or signing up for a 100% renewable plan with your utility.
These measures can help you not only reduce carbon pollution, but also reduce your utility bills and improve your indoor air quality.