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Wednesday, June 19, 2024

The “Other” IRA:

Have you heard? Federal government rebates are no longer limited to solar installations. If you’re looking to upgrade your windows, install a wood pellet stove, purchase an induction stove or make any number of other green energy investments, your timing is ideal. The Inflation Reduction Act, also known (somewhat confusingly) as the IRA, was passed by Congress in August 2023.

The IRA and its associated programs provide tax credits and rebates for a wide array of green energy investments. While the Internal Revenue Service (IRS) has been slow to provide details about which investments qualify under the IRA, it is beginning to release information at www.irs.gov/inflation-reduction-act-of-2022.

The IRA provides residential tax credits ‒ which reduce the amount of tax owed or increase a tax refund ‒ for a wide range of improvements ranging from exterior doors to windows, skylights and insulation materials. Importantly, renters may also be able to claim credits as well as owners of second homes used as residences. And some clean energy investments incurred in 2022 may still qualify for rebates. The amount of credit you can take is a percentage of the total improvement expenses in the year of installation, but in general the rebates include:

• 2022 investments: 30% up to a lifetime maximum of $500

2023 through 2032 investments: 30% up to a maximum of $1,200

• Heat pumps, biomass stoves and boilers: a separate annual credit limit of $2,000 with no lifetime limit.

In addition to credits for home improvement investments, the IRA provides credits for the purchase of new and used electric and hybrid vehicles for personal and commercial use. While the rules on qualifying vehicles have changed over the last year, the Environmental Protection Agency now has an online calculator (fueleconomy.gov/feg/tax2023.shtml) that will tell if a vehicle qualifies for a credit and how much it will be.

The High Efficiency Electric Home Rebate Act (HEEHRA) (www.energy.gov/scep/home-energy-rebate-program) is part of the IRA and provides rebates ‒ funds credited or returned to a customer on completion of a transaction ‒ for efficient electric appliances, of up to $14,000 for low-income households and 50% of costs up to $14,000 for households where income is 80% or more but generally not greater than 150% of the average median income for a specific geographic area. In DC, median income in 2021 was $93,547 (www.datausa.io/profile/geo/washington-dc/). That would mean households with income up to $140,320 qualify for rebates. (Check with a tax advisor for 2023 DC median income levels.)

Qualified electrification projects under HEEHRA include heat-pump HVAC systems and heat-pump water heaters, electric stoves and cooktops and heat-pump clothes dryers, as well as costs for upgrading circuit panels, insulation, ventilation and wiring.

Local businesses are busy meeting demand for these green energy improvements. Tracy Wilcox, vice president of finance at Wilcox Electric, notes, “We’re installing approximately two to three new dedicated circuits for EV charging stations every week. The cost of these jobs varies widely depending on the distance between the electrical panel and the intended location of the EV charging station, and whether or not that distance is a clean run or if there are obstructions. Installing an EV charging station within 15 feet of the panel may cost about $800.”

Wilcox is expecting to get even busier as people learn more about the rebates. “To date,” says Wilcox, “we’ve not seen many people asking for new or expanded electrical panels to accommodate new electric appliances. I don’t think people are yet focused on and informed about what the IRA tax credits are. Wilcox Electric foresees a lot of electric work, and we are starting our education process about the rebates.”

In addition to federal incentives, a green energy investment may also qualify for rebates through the DC Sustainable Energy Utility (DC SEU, www.dcseu.com/). The DC SEU also provides rebates for some purchases that the IRA doesn’t cover for home or business, including refrigerators and electric lawnmowers.

Ernest Jolly, managing director of the DC SEU, notes that his organization has been offering energy efficiency rebates to residents and businesses since 2011. The rules around what qualifies for an IRA tax credit and can be combined with a DC SEU rebate are evolving and specific to each individual, he explains. “We always encourage residents to review IRS guidance and consult a tax professional as it relates to tax credits for energy efficiency and renewable energy measures.”

Stay tuned to the IRA and DC SEU websites for more information. These rebates are helping make green investment a bit easier on your checkbook!

Catherine Plume is a lifelong environmentalist, a writer and an active member of the Sierra Club DC Chapter. The perspectives expressed are her own and do not necessarily represent the positions of that organization.  

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