On August 16, the Inflation Reduction Act (IRA) became law. The IRA is multifaceted; its 730 pages touch on, among other things, prescription drug pricing and tax reform. But most of the act deals in one way or another with energy and climate. The IRA aims to increase manufacturing and deployment of low-carbon technologies in transportation, buildings, and power generation and puts the U.S. on track for a 40% reduction in CO2 emissions by 2030. It also addresses environmental justice and energy affordability with programs targeted at low-to-moderate income (LMI) households and frontline communities impacted by pollution and climate change.
The IRA will likely shape the green building movement for decades. In upcoming articles, I’ll explore different aspects of this landmark legislation. Details of some programs are still unfolding as Federal and State agencies work to implement the act’s provisions. For now, I’ll focus on sections of the bill that are already fairly clear: the extension and expansion of tax credits for energy efficiency upgrades, clean energy projects, and new energy-efficient homes. Homeowners and contractors with qualifying projects completed (or on track for completion) in 2022 may be able to use these credits to cut their tax bills. Longer term, the increased scope and dollar value of these credits—and the stability provided by their decade-long extension—should boost efficiency, renewables, and home electrification. In the short term, the steep increase in some tax credits after the new year and the possibility of additional rebates mandated elsewhere in the IRA may cause confusion as homeowners try to time their projects to maximize their savings.
The Energy Efficient Home Improvement credit
Federal tax credits for efficiency measures in existing homes (renamed the “Energy Efficient Home Improvement Credit” in the new legislation and also referred to as the “25C tax credit” after the…
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