The U.S. Inflation Reduction Act (IRA) signed into law in 2022 has many tax credits for installing rooftop solar, or replacing a gas furnace with an electric heat pump, or replacing a gasoline powered car with an electric vehicle. For low- and moderate-income households, the IRA also includes point-of-sale rebates.

Electrify everything to reduce carbon footprint

by Jim Grimes, April 23, 2023

Have you ever wondered what you can do to reduce your carbon footprint? Quite a lot, it turns out. And it’s pretty simple – electrify everything.

According to the nonprofit Rewiring America, 42 percent of energy-related greenhouse gas emissions come from decisions we make around the kitchen table. This includes the cars we drive, how we heat our homes and water, how we cook our food, how we dry our clothes and where our electricity comes from.

Why electrify everything? Because electric machines are generally much more efficient than their fossil fuel counterparts and, therefore, they generate less emissions. This is true even when the electricity is generated by fossil fuel-burning utilities. Plus, there is a bonus. As electric utilities transition to cleaner renewable energy, the contribution of greenhouse gases by electric machines will diminish over time, whereas emissions from their fossil fuel counterparts will not.

The key to jump-starting this electrifying process in the United States is the Inflation Reduction Act, which became law last year (2022). Many of its provisions are already in effect. For example, the IRA provides tax credits for installing rooftop solar, replacing a gas furnace with an electric heat pump and replacing a gasoline powered car with an electric vehicle. For low and moderate-income households, who do not have adequate tax liability to offset a tax credit, sizable rebates at the point of sale will enable them to switch to all electric. Renters can benefit as well.

Rewiring America estimates the average American household will have $10,600 available to them in IRA benefits that they can use to electrify. Households that electrify everything could save up to $1,800 per year in energy costs. Those are big numbers.

How much money can you get with the Inflation Reduction Act?

Tax credits support clean energy 

by Jim Grimes, April 30, 2023

Just seven more years. By 2030, the world, and by extension the United States, must reduce its greenhouse gas emissions by half to avoid the worst calamities associated with climate change. The timetable is short, and the 2022 Inflation Reduction Act is helping U.S. businesses and households reach the 2030 goal by reducing the upfront costs for transitioning to clean energy.

The majority of IRA funding available to households is in the form of tax credits for which all households qualify. IRA tax credits can be used to install solar panels and batteries (30 percent), switch to an electric vehicle (up to $7,500 new, $4,000 used), convert a gas furnace to an electric heat pump (up to $2,000), and weatherize your home (up to $1,200), among other upgrades. You purchase the item and then file for a credit on the same year’s tax return. For solar panel and battery purchases, households can rollover unused tax credits year over year.

By the end of 2023, low and moderate-income households will be eligible for point-of-sale rebates (up to $14,000) for qualified residential electrification upgrades. Rebates make more sense for these households because they can least afford the upfront costs and they don’t have the tax liability required to offset a tax credit.

The easiest way to determine what tax credits and rebates are available to your household is to use the Rewiring America IRA Savings Calculator. Enter a few pieces of information, and the calculator will show you the dollar amounts of rebates and tax credits for which you qualify. Limits apply, so be sure to check out the IRA fact sheets.

There has never been a better time than now to begin the journey of cutting your carbon footprint in half by 2030.

Next, I will discuss the need for a multi-year plan, using available IRA funds over time, to electrify everything.

Think long term 

by Jim Grimes, May 2, 2023

Perhaps you’ve read the previous two articles about reducing your household’s carbon footprint by electrifying everything.  Perhaps you’re interested.  Have you used Rewiring America’s IRA Savings Calculator to determine the tax credits and rebates available to you through the Inflation Reduction Act (IRA)?  Are you ready to turn your interest into reality?   If so, you have 10 years, until 2032, to take advantage of the IRA funds available to you. This calls for a multi-year plan.

When developing your multi-year plan, consider:

  • The distinction between tax credits and rebates.  Tax credits are recouped when you file your taxes.  Point-of-sale rebates reduce the purchase price.
  • Tax credits for rooftop solar, battery storage, and geothermal heating are 30% and are not capped at a specific dollar amount.  Plus households can roll over unused tax credits year over year for these upgrades.
  • Electric vehicles (EVs) are eligible for a tax credit in 2023 but will qualify for a point-of-sale rebate in 2024, so you might consider waiting until 2024 to purchase an EV unless you have a 2023 tax liability sufficient to offset the EV tax credit.
  • Before you switch from a gas furnace to an electric heat pump, weatherize your home.  Energy audits, attic insulation, qualified energy efficient windows and doors are all eligible for IRA tax credits.
  • There is an annual cap of $1,200 for tax credits related to residential energy efficiency upgrades (e.g. insulation), $2,000 cap for heat pumps and heat pump water heaters, and a $3,200 total cap for all such upgrades. These caps are reset each year.
  • The rules for point-of-sale rebates related to residential electrification upgrades won’t be released by state energy offices until the end of 2023, so consider waiting until 2024 to use these rebates if you qualify.

Rewiring America provides several case studies in its publication “Go Electric” IRA Guide (rewiringamerica.org/IRAguide) where multi-year plans are developed for a variety of situations, including homeowners with low, moderate, and high-incomes, and renters.  This is a tremendously helpful guide when establishing your plan to electrify everything and cutting your household carbon footprint in half by 2030.

Grimes

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Huge thanks to Jim Grimes for helping us understand the Inflation Reduction Act.






The Inflation Reduction Act includes a broad range of incentives for homeowners, businesses, and even tax-exempt non-profits, like schools and congregations. It covers solar, heat pumps, EVs, and much more. FAQ here. IRA: Indiana Energy Savings Guide

The Inflation Reduction Act includes incentives for tax-exempt non-profits, like schools and congregations, to go solar. Learn more here.

How the Inflation Reduction Act helps you and your community go solar. Learn more here.

This webinar recording helps explain how cities (and other non-profits) can take advantage of the direct pay. There’s a lot to take into account. You might also be able to stack this benefit with other grants. They mention the city’s role to help non-profits learn about this opportunity, as well partnering with non-profits. This might be a good fit with solar for schools. The recording is available on their website and also on youtube.

AP website: https://www.americanprogress.org/events/how-cities-can-take-advantage-of-direct-pay/
Youtube: How Cities Can Take Advantage of Direct Pay
Bookmark to Tax Credits & Projects most relevant to local gov: solar, EVs, EV infrastructure, solar
Bookmark to Direct Pay Process in More Detail

The Indiana Resilience Funding Hub (IRFH), jointly administered by ERI and the Center for Rural Engagement, helps Hoosier communities pursue federal funding opportunities for climate, energy, and resilience projects. They have a series of webinar recordings here.

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