Inflation Reduction Act tax credits will put more money in your account
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Inflation Reduction Act Tax Credits: A Guide to Saving Money and Fighting Climate Change in 2023

Kimberly Hutchings
February 27, 2023

In a perfect world, making our lifestyles more environmentally friendly would be a no-brainer. Given a choice, most of us would love to be able to reduce our climate impact and increase the efficiency of our everyday habits!

The problem is, there are a few reasons why the answer isn't quite so simple — and one of the biggest ones? Cost.

Many climate-friendly solutions, like electric vehicles or adopting renewable energy sources, come with a pretty hefty price tag. And while these solutions will likely help us save money in the long term, the upfront costs can deter many from making the initial investment.

Fortunately, new climate and tax laws under the Inflation Reduction Act make investing in an energy-efficient future easier. In fact, the legislation marks the most notable piece of action ever taken by Congress toward supporting clean energy, mitigating the impacts of today's climate crisis and making it more accessible for each of us to do our part. Within the act, you'll find a wide range of opportunities to save, from tax credits to rebates, that look specifically at two of the most significant sources of emissions contributing to climate change today. Namely, housing and transportation.

While rebate opportunities will come into effect later this year, tax credits took effect on January 1st and are available to consumers now. Unlike rebates, credits work to offset your tax bill, taking away from the amount due when it's time to pay rather than providing a direct refund. Because of this, it's important to remember that savings might look different for everyone, and the refund will only be applicable if you owe any taxes at the year's end.

Sound confusing? Don't worry. We promise it's simple and the New York Times recently put together an extensive guide with everything you need to know! To help you learn more about these tax credit opportunities and how you can take advantage of them, here's a quick breakdown of the biggest takeaways. Keep reading to find out how you can start saving money and fighting climate change in 2023!

Saving Money and Fighting Climate Change at Home with the Inflation Reduction Act's tax credits

1. Get an Energy Audit

A home energy audit is the best place to start when it comes to saving money and fighting climate change at home. During an audit, a licensed professional will come to your house and conduct an in-person walk-through, analyzing each room to identify energy use, assess your daily habits and highlight opportunities for efficiency upgrades. A professional audit generally costs around $100-$150, but can often save you money on your utility bill in the long run. Some utility companies even offer them for free! 

In preparing for an audit, it can be helpful to list out any existing issues you've identified in your home and set aside some time to reflect on your current lifestyle routines.

According to the U.S. Department of Energy, you should consider asking yourself questions like:

  • How many people are at home during working hours?
  • What temperature do you usually keep your home during warm weather and cold weather seasons?
  • How many people live in your home?
  • Do you typically use every room?

From here, you can make a plan to cut back on energy use, save money on your monthly bills and invest in other upgrades that are good for the planet, *and* your wallet by qualifying you for even more tax credits! 

Here's how you can save:

As of January 1st (and through until December 2032), you can claim 30 percent of the cost of a home energy audit on your taxes, up to a value of $150. 

2. Opt for Energy Efficient Renovations and Appliances

Once you’ve identified the areas where your home could be more energy efficient, consider how you’re going to make these improvements! Making energy-efficient choices when it comes to home renovations can help you further reduce your energy footprint, and in 2023, these eco-conscious options also provide you with even more opportunities to save!

Whether it's an upgrade to your home's insulation, purchasing a high-efficiency water heater, making the switch to energy-efficient windows and doors, or investing in appliances that meet energy certification requirements, an eco-friendly renovation choice can equal some major savings come tax season. 

Understanding the Inflation Reduction Act Tax Credits.

Here's how you can save:

Now through 2032, you can claim 30 percent of the cost of certain home efficiency upgrades to a total of $1200, with spending caps dependent on the types of upgrades made. 

For example, you can apply that $1200 in combination with the following categories:

  • Qualifying appliances to a maximum of $600.
  • Insulation upgrades to a maximum of $1200.
  • Doors to a maximum of $500.
  • Windows and skylights to a maximum of $600.

Additionally, installing a heat pump (a single-unit air system that both heats and cools your home) can qualify you for a credit of 30 percent on purchases up to $2000. And the best part? This particular credit exists independently of the $1200 cap mentioned above!

3. Invest in Renewable Energy Options

Okay so you’ve found room for improvement, and you’ve made the energy-efficient renovations, but now the question is, how are you powering your new eco-friendly upgrades? Well,  the good news is, investing in renewable energy technologies is another way you can save money on taxes and help fight climate change in 2023!

Qualifying clean energy investments include solar water heaters, wind turbines, geothermal heat pumps and even some battery storage solutions. You can find a list of redeemable expenditures through the IRS by clicking here!

Here's how you can save:

As of January 1st, 2023, you can claim 30 percent of the cost of applicable investments, including spending related to labor, permits and inspections, with an uncapped limit on the total purchase price! This tax credit can be applied retroactively to upgrades made in 2022 and will continue to be available until 2035, although it’s important to note that available credit will drop to 26 percent in 2033 and 22 percent in its final year, 2034.

Save Money and Fight Climate Change On-The-Go

1. Buy a New or Used Electric Vehicle 

Did you know that in California alone, 50% of greenhouse gas emissions come from transportation? So making a strategic vehicle choice, like opting to go electric, can significantly reduce your impact! 

Luckily, these new federal tax incentives are making investing in electric vehicle options more accessible, and for the first time ever, these credits can apply to used vehicles too! While there are a few stipulations, for instance, the car must come from a qualified manufacturer and meet specific requirements surrounding battery components and the sourcing of certain minerals; the credit can go a long way in helping to reduce taxes owed. Here are a few tips that can help guide your next electric vehicle purchase!

A guide to maximizing benefits from Inflation Reduction Act Tax Credits.

Here's how to save:

Now through 2032, you can claim a value of up to $7,500 on qualifying vehicles with a price cap of $55,000 on new cars and sedans and a price cap of $80,000 on electric trucks, vans and SUVs. While anyone can access these savings, it's important to note that you must be an individual taxpayer making $150,000 or less, a head of household earning $225,000 or less, or a joint taxpayer making $300,000 or less to qualify.

Plus, as a bonus, by 2024, you'll be able to use this credit right at the dealership, which means no more waiting for tax season to reap the benefits! Instead, the government will transfer the credit directly to the dealer, resulting in immediate upfront savings for you. Now that's a reason to go electric! 

2. Install an Electric Vehicle Charging Station at Home

Now that you've decided to invest in an electric vehicle, you might be looking for an at-home charging option to keep your car powered up and ready to go. The great news is this qualifies for tax savings in 2023, too — so long as you live in an eligible rural or low-income region.

The credit applies to charging stations for vehicles as well as both e-bikes and electric motorcycles and covers the hardware and installation costs. It even includes any necessary upgrades to your home's electrical panel!

Here's how to save:

Now through 2032, you can claim a credit of 30 percent, up to $1,000, on any home charging station installations.

Another Great Way to Save in 2023? OhmConnect!

Finally, we couldn't talk about saving money and fighting climate change in 2023 without mentioning one of the easiest (and most fun) ways to do it. We're talking about OhmConnect of course!

OhmConnect is a free service that helps you save energy and money by reducing your monthly bills. As a free member, you'll receive a text or an email whenever electricity costs spike in your area, empowering you with the knowledge to know when to power down and reduce your consumption.

You'll earn points that qualify you for weekly prizes and gift cards, and the best part is, OhmConnect will sell the energy you save back to the grid, sharing those profits with YOU! Curious to learn more? Ready to get started? Click here for everything you need to know.

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