A flurry of environmental tax breaks just came into effect thanks to last year's climate bill. From solar to electric vehicles, here's how you could save thousands of dollars.

Solar panels sit on rooftops at a housing development in Folsom, Calif., Wednesday, Feb. 12, 2020.

Rich Pedroncelli, File/Associated Press

• The Inflation Reduction Act included some environmental incentives that took effect on January 1.
• The bill includes tax credits for electric vehicles, solar panels, and home energy updates.
• Americans could save thousands by making their homes more efficient while claiming tax credits.

The Inflation Reduction Act — the Democrats' big tax, climate, and health bill passed by Congress last year — includes a slew of environmental initiatives that many Americans can take advantage of right at home.

Those initiatives include ten years of consumer tax credits to make homes more sustainable and energy efficient, as well as incentives to buy electric vehicles or hybrids. Some measures took effect when President Joe Biden signed the act into law in August, but more took effect or were expanded on January 1.

Here are some of the green initiatives and tax breaks in the bill that Americans can start using at home today.

Installing solar

Households that outfit their homes with rooftop solar can receive a tax credit to cover 30% of the cost of installation, effectively knocking the cost of installing solar down by thousands of dollars. To use the tax credit, you can install solar power on your property, for example, by hiring a licensed solar installer certified by an organization like the North American Board of Certified Energy Practitioners.

Thirty percent of whatever you spend on the installation — including labor, solar panels, energy storage devices, and other equipment — can be claimed as a federal tax credit. According to the Center for Sustainable Energy, the average size for a residential solar system is 5 kW, costing around $20,000. At that price, the claimable tax credit would be $6,000.

The tax credit for solar is set to last until 2032, at which point it will lower and then expire in 2035 unless Congress renews it. 

Insulation and weatherization

There are several ways to make a home more energy efficient while saving money on heating and cooling, including sealing windows and doors, improving insulation, and replacing your gas furnace with an electric heat pump. The first step is to get an energy audit done on your home in order to figure out what it needs. 

A home energy audit — also called a home energy assessment — involves having a professional evaluate how much energy your home uses and where there are any inefficiencies that can be improved. The auditor will then recommend further steps. An assessment can cost anywhere from $100 to $600, depending on the size and location of your home. Alternatively, you could conduct a DIY home energy assessment.

As of January 1, a household can claim a tax credit of up to $150 for an energy audit conducted by a professional inspector. Any updates done after the assessment, such as adding insulation or efficient windows and doors, can be claimed as a tax credit for up to 30% of the total cost, up to $1,200.

Replacing your gas furnace with a heat pump

More than 10% of US carbon emissions come from gas and fuel oil used in heating and cooking, according to RMI. But heat pumps, which transfer cold air from one place to another, can be up to four times as efficient as a gas furnace. RMI said that as of 2020, 99% of US homes could reduce their carbon emissions by replacing a gas furnace with a heat pump.

Under the IRA, households that install a heat pump can claim a tax credit of 30% of the total cost of buying and having it installed, up to $2,000.

Low- and moderate-income households can benefit even further by receiving rebates that can cut the cost of a heat pump by up to $8,000. And if electrical updates are needed in order to install heat pumps, households can get rebates of up to $4,000 for that. These rebate programs vary from state to state and could be implemented through utility companies or a state-run agency, so you'll need to research specifics for your state.

Buying an electric vehicle

Incentives to purchase new or used electric vehicles were also boosted in the new climate bill.

For new vehicles, individuals who earn less than $150,000, households who earn $225,000, or joint filers who earn less than $300,000 may qualify for a tax credit, which can be up to $7,500. The vehicles have to be made in the US and cost no more than $80,000 for trucks, vans, and SUVs, or no more than $55,000 for others, like sedans. The IRS has compiled a tentative list of models that would qualify.

For buying a used electric vehicle, households with incomes that qualify can get a tax credit of up to $4,000 as long as the vehicle is at least two years old and costs no more than $25,000.

Read the original article on Business Insider

from Business Insider https://ift.tt/7Jrg8m1