Thanks to last year's climate bill, a rush of tax incentives for the environment have just become effective. Here are several ways to save thousands of dollars, from solar to electric automobiles.

 By Kesey Vlasmis । jan 09, 2023, 05:23 IST

In Folsom, California, a house complex has solar panels on the rooftops.

Many Americans can benefit from a number of environmental provisions in the Inflation Reduction Act, the large tax, health, and environmental legislation proposed by the Democrats and approved by Congress last year.

These programmes include 10 years of consumer tax credits to improve the sustainability and energy efficiency of homes, as well as incentives to purchase hybrid or electric cars. When President Joe Biden signed the bill into law in August, some provisions went into effect. However, more provisions came into effect or were expanded on January 1.

Here are a few of the tax incentives and ecological programmes in the bill that Americans may begin utilising at home right away.

Putting in solar

Families who instal rooftop solar on their houses may be eligible for a tax credit that will pay for 30% of the installation fee, effectively lowering the cost of solar installation by thousands of dollars. You may instal solar electricity on your home to take advantage of the tax credit, for instance, by employing a professional solar installer who has earned certification from a body like the North American Board of Certified Energy Practitioners.

You may claim a federal tax credit for 30% of whatever you spend on the installation, including labour, solar panels, energy storage systems, and other equipment. The Center for Sustainable Energy estimates that a household solar system's typical size is 5 kW and that it costs about $20,000. The claimable tax credit would be $6,000 at that price.

The solar tax credit is scheduled to endure until 2032, after which it will start to decline and eventually disappear in 2035 unless Congress extends it.

Weatherization and insulation

There are several ways to improve a home's insulation, seal windows and doors, and reduce heating and cooling costs. You can also switch out your gas furnace for an electric heat pump. To determine what your home needs, the first step is to have an energy audit done on it.

A home energy audit, also known as a home energy assessment, is hiring a specialist to examine how much energy your house consumes and where any inefficiencies may be resolved. The auditor will then suggest additional actions. Depending on the size and location of your house, an evaluation may cost between $100 and $600. An alternative would be to perform a do-it-yourself home energy evaluation.

As of January 1, a home can get up to $150 in tax credits for an energy audit done by a qualified inspector. Any improvements made following the evaluation, such as installing insulation or energy-efficient windows and doors, may be eligible for a tax credit of up to $1,200, or up to 30% of the whole cost.

installing a heat pump in place of your gas furnace

According to RMI, the use of gas and fuel oil for cooking and heating accounts for more than 10% of US carbon emissions. The efficiency of a heat pump, which moves cold air from one location to another, can be up to four times that of a gas furnace. By switching from a gas furnace to a heat pump by 2020, 99% of US houses may cut their carbon emissions, according to RMI.

Homes that instal heat pumps are eligible for a tax credit under the IRA of up to $2,000, equal to 30% of the total cost of purchasing and installing the heat pump.

Furthermore helping low- and moderate-income homes, incentives that can reduce the price of a heat pump by up to $8,000 are available. Additionally, families are eligible for up to $4,000 in rebates if electrical upgrades are required in order to instal heat pumps. You must do your homework on the specifics for your state because these rebate programmes differ from one state to the next and may be offered by utility providers or a government body.

Purchasing an electric car

The new environment policy also increased incentives for buying new or secondhand electric cars.

Individuals making less than $150,000, families making less than $225,000, or joint filers making less than $300,000 may be eligible for a tax credit of up to $7,500 on new automobiles. Trucks, vans, and SUVs must be manufactured in the US, while other cars, such as sedans, must cost no more than $55,000 or $80,000. A list of potential qualifying models has been developed by the IRS.

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