Inflation Reduction Act brings potential benefits for efficiency investments

by: Clay Carroll, Manager of Member Services | December 1, 2022

As 2022 continues to fly by, it won’t be long before we find ourselves in tax season again. My process is still fairly simple. I file my own taxes, focusing mainly on filling out all the right forms with all the right amounts. I typically don’t pay much attention to the more complicated items like tax credits – but some new opportunities may have me rethinking my strategy over the next few years.

As you’re likely aware, the Inflation Reduction Act passed back in early August. While the bill is loaded with different items, it includes some noteworthy tax credits that can help reduce the costs of making your home more energy efficient. The bill includes two types of energy tax credits – residential clean energy credits and home improvement credits. They are each deserving of some explanation, along with how you can couple them with Callaway Electric’s rebates to make your home upgrades as economical as possible.

If you are not familiar with federal energy tax credits, it is important that you do not mistake these tax credits with tax deductions. Deductions will lower the amount of your taxable income, while credits will reduce the amount of tax owed. It can also be easily mistaken that these credits are similar to a tax refund, however this is also not true. You won’t be receiving a check, but the credits will lower the amount of taxes that you owe. If your tax liability is less than the value you’re supposed to get credit for, not to worry. Any unused credits can be applied the following year (through 2034).

Home Improvement Tax Credits

Following a similar tax credit that ended in 2021, the home improvement tax credit will offer up to 30% of the costs for all eligible home improvements made during the 2022 tax year through 2034. The tax credits will cover items such as home energy audits ($150), exterior doors ($500), exterior windows and skylights ($600), electric panels and related equipment, and more. There will be a limit of $1,200 on the credit amount that can be claimed each year – this is replacing the $500 lifetime limit that was previously in place. These credits will also include up to $2,000 for an electric heat pump, which can be coupled with Callaway Electric’s $150/ton rebate on qualifying air source heat pumps. This specific category will allow a homeowner to exceed the $1,200 annual credit limit.

Residential Clean Energy Tax Credits

Retroactive to any installs performed in 2022, the Residential Clean Energy Tax Credit will offer a 30% tax credit for qualifying whole-home clean energy systems through 2032. Along with being offered to homeowners, this tax credit can also be extended to businesses as an investment tax credit. Ground source heat pumps (GSHP), also referred to as geothermal heat pumps, will qualify for this incentive and can be coupled with Callaway Electric’s current $850/ton rebate. Between the rebate and tax credit, a home or business owner could expect to recover nearly 50% of the cost of installing a new ground source system – a renewable technology that has proven to use up to 50% less energy than other heating and cooling systems and doesn’t rely on weather patterns or time of day to save you money.

For more information about the incentives included in the Inflation Reduction Act and how they can be paired up with available rebates from Callaway Electric, please do not hesitate to give our member services department a call at 573-642-3326 or email CECService@callawayelectric.com.

Learn more about available rebates from Callaway Electric at callawayelectric.com/rebates