The Inflation Reduction Act (IRA) is more than just a piece of legislation—it’s a golden opportunity for homeowners to upgrade their homes, save money, and help the environment.
But how exactly can you take advantage of it?
Let’s break down the benefits of the IRA’s tax credits and rebates, and walk you through the simple steps to claim them.
What’s in It for Homeowners?
The IRA offers two main incentives for making your home more energy-efficient: tax credits and rebates.
These incentives are designed to help you pay for energy-saving upgrades that not only cut your utility bills but also reduce your home’s environmental impact.
Here’s a closer look at the savings you can tap into:
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Up to $8,000 in tax credits: If you make energy-efficient improvements to your home—such as upgrading insulation, replacing windows, or installing a heat pump—you can qualify for up to $8,000 in tax credits. This reduces the taxes you owe, dollar for dollar.
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Up to $14,000 for electric appliances: Thinking about upgrading to energy-efficient electric appliances? You could get up to $14,000 to help cover the costs of things like a new water heater, electric stove, or heating and cooling system.
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$1,600 for weatherproofing: Weatherproofing your home can make a big difference in comfort and energy savings. The IRA offers up to $1,600 for adding things like better insulation, weather stripping, or energy-efficient windows that keep your home warm in the winter and cool in the summer.
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$840 for an energy-efficient induction stove: Induction stoves use less energy and cook food faster than traditional gas or electric stoves. The IRA provides up to $840 to make this switch, helping you save on energy bills while cooking more efficiently.
These tax credits and rebates are a great way to reduce the upfront cost of making your home greener and more efficient. Plus, the long-term benefits of lower energy bills add up over time.
How to Claim These Savings
The process of claiming these savings is straightforward, whether you’re filing for a tax credit or applying for a state rebate. Here’s how to get started:
1. Choose an Eligible Home Upgrade
First, decide which energy-efficient improvements or appliances you want to invest in. Not every upgrade qualifies for a tax credit or rebate, so it’s important to pick one that’s on the approved list. Some common examples include:
- Upgrading your home’s insulation
- Replacing old windows with energy-efficient ones
- Installing an electric heat pump for heating and cooling
- Switching to energy-efficient appliances, like a new electric stove or water heater
For a full list of eligible improvements, check out the Home Energy Rebate Programs page on Energy.gov. This resource will help you figure out which upgrades qualify and how much you can save.
2. File IRS Form 5695 with Your Taxes
Once you’ve completed your home upgrade, it’s time to claim your tax credit. The process is simple—just fill out IRS Form 5695 when you file your taxes. This form allows you to claim the Residential Energy Efficient Property Credit and the Nonbusiness Energy Property Credit.
What does this mean? Essentially, the tax credit reduces the amount you owe in federal taxes. For example, if you owe $2,500 in taxes and you qualify for a $1,000 credit, you’ll only owe $1,500. Alternatively, if you don’t owe much in taxes, this credit can increase your refund.
Don’t forget to keep records of your home improvements, such as receipts, invoices, and manufacturer certification statements. These documents prove that your upgrades meet the IRS requirements for energy-efficient improvements.
3. Check for State Rebates
While tax credits are claimed through the federal government, rebates are managed by individual states. Some states already have rebate programs in place, while others are still waiting for approval from the Department of Energy.
These rebates are an additional bonus to the tax credits, allowing you to get more money back on your energy-efficient upgrades.
To see if your state has launched its rebate program or to find out when it will be available, visit Rewiring America’s website.
They provide up-to-date information on state rebate programs, including how to apply and which upgrades qualify.
Why These Upgrades Are Worth It
The financial benefits of these tax credits and rebates are clear, but the impact doesn’t stop there.
By making energy-efficient improvements, you’re also doing your part to help the environment.
These upgrades reduce your carbon footprint, lower your energy consumption, and contribute to a cleaner, more sustainable future.
Plus, the energy savings from these upgrades mean that over time, they pay for themselves.
Your energy bills will drop, making your home more affordable to run, all while increasing its overall comfort and value.
Final Thoughts: Start Saving Now
The Inflation Reduction Act is a win-win for homeowners. You can improve your home, cut down on energy costs, and help the planet—all while benefiting from tax credits and rebates that make these upgrades more affordable.
Whether you’re considering new insulation, an electric stove, or a weatherproofing project, now’s the time to act.
To get started, explore Energy.gov’s resources for a list of eligible improvements, and don’t forget to visit Rewiring America for help navigating the rebate programs in your state.
Take advantage of these benefits today and enjoy a more energy-efficient, eco-friendly home for years to come!
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