The new Inflation Reduction Act (IRA) signed into law by President Joe Biden on August 16, 2022, is set to positively impact Americans in a number of ways, and ultimately, the world at large. From decarbonizing the economy and increasing the country’s energy security to investing in disadvantaged communities and resilient rural communities, the Act puts a focus on climate change and energy costs.
In essence, the IRA consists of a set of regulations designed to help struggling Americans deal with rising inflation while directing the country away from the use of fossil fuels. The goal: 40% emissions reduction by 2030.
Read more about all the issues addressed in the IRA.
What the Inflation Reduction Act 2022 Does for Energy Costs
In short, the IRA could cut energy bills by $1,800 each year, according to the non-profit Rewiring America, with rebates extending savings even more. The Rocky Mountain Institute (RMI) estimates a nation-wide savings of around $5 billion within two years.
In total, the bill earmarks $80 billion in rebates, with as much as $14,000 in cash back when households invest in green-energy upgrades. Sizable subsidies will also cover improvements, like $840 for electric stovetops, $1,750 for electric water heaters, and as much as $8,000 per household. Homeowners can also receive a 30 percent credit for installing solar panels.
Between upfront discounts on upgrades, tax credits, and performance rebates, individual households could see thousands in savings annually. As Heidi Shierholz, president of the Economic Policy Institute (EPI), says, “It will make it easier for families to actually make these clean-energy changes.”
Who Benefits From the Inflation Reduction Act of 2022?
Virtually everyone who owns real estate. The bill’s incentives, which include upfront money, tax credits, and rebate programs are intended to encourage residential upgrades that use more clean-energy technologies and increase energy efficiency.
The portion of the IRA that targets home energy efficiency is called the Home Energy Savings Retrofit Rebate Program, or HOMES. Here’s an example of how this program can help homeowners. If you make an upgrade that saves you more than 20% on your overall energy costs, you’ll see $2,000 back—$4,000 for 35% or more. And for those in low- or moderate-income households (less than 80% of the median income in their home city), the benefits could be even higher. Underserved communities are also included.
Upgrades that involve going electric—think electric stoves, ranges, and ovens; electric pump clothes dryers—and other efficiency changes would also receive tax credits and/or rebates along with community and residential solar projects.
Owners of rental properties also stand to benefit from the Act. The original bill included a carried interest provision that would have required any multi-family owner to hold the asset for three years to qualify for carried interest treatment. However, this was written out of the final bill.
Also included in the package for the U.S. Department of Housing and Urban Development (HUD) is $837.5M in the form of loans and grants to owners of affordable housing who take steps toward indoor air quality, energy storage, climate resilience, electrification, energy or water efficiency, low-emission processes and building materials, or zero-emission electricity generation.
As with single-family homeowners, owners of multi-family structures are also eligible for retrofit rebates: $2,000 per unit if upgrades and changes result in at least 20% energy savings up to $200,000 and $4,000 per unit for a 35% savings up to $400,000. The same scenario applies to low- and moderate-income buildings at $4,000 (for 20% savings) and $8,000 (for 35% savings) per unit.
What People are Saying about the Inflation Reduction ACT of 2022
Some think the energy requirements set forth in the bill could wind up costing homeowners more. Others have pointed out how the new legislation leaves renters in the cold, positing that many fell behind in making both utility and rent payments and are at the mercy of their landlords to take advantage of the benefits laid out in the IRA.
However, many are embracing the positives, citing them as a step in the right direction toward clean energy, overall, as well as democratizing who can participate in solar energy projects and upgrades.
Improve Your Home Energy Score
As we’ve been writing about on this blog for years now, there are lots of ways to improve your home energy score before advertising your home for sale on the market. Many of these useful home energy improvements will be able to be performed at a significantly reduced costs once the Inflation Reduction Act is finalized. Take advantage of the monetary benefits to improve today’s utility bills and enjoy a higher energy score rating in the future!