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Insulation Installers and Inflation Reduction Act Rebates

greenhomeownersunite | Posted in General Questions on

I’m a residential efficiency contractor for existing homes. While we do windows, heat pumps, etc, it of course is mostly insulation & air sealing. My question is: what are insulators and others doing before the new Inflation Reduction Act rebates kick in?

On paper the law is great for our stuff. Rebates, tax credits, etc. Will make going green more affordable than ever. But devil’s in the details, and we have a concern: the new HOMES & electrification rebates are some time away, and most potential customers understandably want to wait until they can get $2,000-$8,000 (or more) off. Our best working understanding is that the rebates are a year away (between when DOE opens it, states apply, states receive, and states unveil plan to provide the rebates). Although we have heard rumor they could be back dated to January, the law itself says anyone starting a project after enactment of the law is technically eligible now (I just don’t want to start listing rebates on our quotes if they’re not real yet)

In theory we have the expanded residential energy efficiency tax credit (25c). But we think we’ve found another conundrum: it only applies to insulation & air sealing material, not labor/installation. So to get a client a $1,200 max rebate, we’d have to use $4,000 in materials. Your average attic or wall insulation project (unless maybe spray foam) won’t hit $4,000 in material. That’s the rule now with the 25c (although the max amount is less), and we don’t see in the law that wording changed (and waiting for IRS guidance on the matter).

So what are insulators doing? We don’t think it’s right to not tell customers about these upcoming incentives just so they undertake some work now. We’re not looped in with public weatherization programs, and they’re not opening to other contractors at this time. Are firms already reflecting rebates in their pitches? In theory, if a 35% reduction requires multiple improvements in a home, are firms starting a phase of a home improvement project (dense pack or basements) and finalizing it (attics, HVAC, etc) after the rebates are officially available so the final invoice lists the full project done after that last phase to then get the 35% IRA HOMES rebate?

A year is a long time to wait for most residential firms. It is causing us to consider small commercial via the Section 179d commercial energy deduction since we already pay prevailing wage, but our heart is in residential. Otherwise we may have to look to other areas outside of energy efficiency, and that’s just time lost in trying to cut carbon emissions. So what to do?

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Replies

  1. DC_Contrarian | | #1

    You're free to price your services however you like. Offer free installation with the purchase of materials, and price your materials accordingly.

  2. Expert Member
    BILL WICHERS | | #2

    I would try to get as many of your customers as much of the rebates as quickly as possible, since there is some concern that the programs may be phased out earlier than originally planned. Some of the efficiency upgrade programs in the past have been a maximum dollar amount per home, and can be spread out over the years until you meet the cap, so you can do a multi-stage project and claim partial rebates up to the maximum allowable total dollar amount. I'm not sure if that's the case with the new rebate programs, but I would hope that it is.

    Regarding rebate programs not really fitting into the way construction actually works, that's an unfortunate reality of many gov't programs: they are often not well thought out, and you end up with oddball problems like this. You'll need to get that figured out with the IRS people and probably some tax accountant people too, and my guess is that this will get more hammered out with time as other people call in with confusion :-)

    Bill

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