Let’s start by sending our thoughts to those suffering and grieving from the fires in Maui. If you’re at all interested in sending relief aid to those on the ground, the Maui Strong Fund is one option to consider.
It’s moments like these that solicit more gratitude for the blessings in our lives, especially friends and family.
These moments of crisis can also push us to improve the way things are done — create better systems, even more efficient ones. Or just change the systems altogether.
Change often comes from difficulty.
It looks like the IRS is finally making the move toward a completely digitized correspondence process by the 2025 filing year and will even start going paperless in 2024. That means you can skip the snail mail and start uploading things online. This should speed up processing times and reduce paper consumption significantly.
This isn’t the only change coming out of Washington, D.C. Thanks to the Inflation Reduction Act’s clean energy focus, when you start making energy efficient home improvements, you’ll not only save on your energy bill, but you might also be able to save on your tax bill.
Here below is a breakdown on the new green energy incentives that are designed to provide tax breaks for people who make green energy improvements to their homes (or, in some rental properties).
Energy Efficient Home Improvements
“Home wasn’t built in a day.” — Jane Sherwood Ace, American radio personality
Blistering heat and unusually cold weather can get your heating and cooling units working overtime. That’s totally fine if it keeps you from sweating through the night or teeth chattering in the morning … at least until the bill comes.
Isn’t it funny how we forget about high energy bills until extreme temps crank up the cost of running that unit night and day?
Ideally, you’d started thinking about having a more energy-optimized home before weather extremes demanded more energy use. But, to be fair, the cost of making those improvements might make you hit the pause button. These kinds of repairs ain’t cheap.
But maybe you didn’t know that there are incentives you can take advantage of right now in the form of tax savings. And frankly, that’s a great motivator for replacing your aging AC unit or your drafty, old windows and doors.
There are three potentially big savings incentives you can claim thanks to the Inflation Reduction Act.
1) The Energy Efficient Home Improvement Credit (EEHIC)
The EEHIC is a federal tax credit that’s worth 30% of the cost of qualified energy efficient home improvements, up to a maximum of $3,200 per year.
That’s a nice savings to offset those big replacement price tags.
And since the EEHIC is available through 2032, it means you could spread out home improvement costs over the next 10 years to maximize those savings.
There are some stipulations to claiming the credit of course. To qualify, improvements must be made to your primary residence and must meet certain energy efficiency standards.
Plus, it’s important to note that only certain kinds of upgrades actually qualify for the credit. Things like installing new insulation, replacing windows, and/or upgrading your HVAC system.
Figuring out which improvements to make can be tricky. But you don’t have to go at it blind. You could also get a home energy audit to see what actually needs updating. These types of audits typically cost $150 – $200 (of course be prepared for a sales pitch from the company doing the audit).
And, that audit expense also qualifies for the EEHIC tax credit…
2) The Residential Clean Energy Credit (RCEC)
Similar to the EEHIC, the RCEC gives you up to 30% of the expense for installing new energy regulating systems including solar, wind, geothermal, biomass, and fuel cell power.
The most common situation here would be adding solar panels and getting a 30% tax credit on that cost.
For a more complete list of what does and does not qualify, the IRS has some FAQs.
3) The Home Energy Rebate Program
While not a tax credit, these rebates can be a boost when you’re making improvements, particularly with your electric appliances.
Eligibility depends on your family’s income (should be below 150% of the median for your area).
Qualifying homeowners can get rebates for stoves and ovens ($840), electric wiring ($2,500), insulation/air sealing/ventilation ($1,600), and heating or cooling with a heat pump ($8,000).
Keep in mind that certain limits apply with these depending on your income, and the rebates may not be available in your area.
According to the Inflation Reduction Act, a total of $4.5 billion in rebates will be given out to families by state and tribal governments that create their own qualifying programs. The funds will be available up until September 30, 2031.
You can learn more and check your eligibility for rebates here: https://www.energy.gov/scep/home-energy-rebate-program
If you’re making plans to replace things in your home, especially appliances, you’ll want to see if you can get some money back on what you spend.
We know you want to take advantage of every tax credit and saving option that’s available to you, so we are here to make sure you don’t miss out.
Looking out for you,
Pronto Income Tax Team
