These energy-saving provisions of the Inflation Reduction Act take effect immediately

With the Inflation Reduction Act signed into law, some sections of the new law that expand tax incentives and rebates for making homes more energy efficient take effect immediately. 

The residential energy efficiency tax credit has been tripled from 10% to 30% for qualified energy efficiency improvements, and the previous lifetime cap on how much you savings can claim through this tax credit has been replaced with an annual limit depending on what items are installed. For big purchases like heat pumps, the annual limit is the lesser of $2,000 or 30% of the cost.

With the lifetime cap on the residential energy efficiency tax credit now scrapped, the annual limit resets every year, so you can incrementally make improvements to your home’s energy efficiency every year.

One good way to get started is by bringing in an expert to conduct a home energy audit to find out where you can make improvements in energy efficiency.  Under the new rules, the cost of this audit is now eligible for a tax credit. You can get started on your home energy audit and maybe some smaller weatherization work this fall using your 2022 tax credit, and then you can come back next year with a list of projects to use your 2023 tax credit.

This bill also extends residential clean energy tax credits that were set to phase out. Investments in home solar systems, solar hot water heaters, fuel cells, small wind turbines, and geothermal heat pumps are now eligible for a 30% tax credit instead of the 26% rate that was in the process of being phased out. That 30% rate will now continue through the end of 2032.

With the Inflation Reduction Act, these newly-expanded tax credits are ready to start helping more homeowners save money on energy bills right away.