The Inflation Reduction Act that was signed into law is meant to address global warming and slow down climate change. That means there are some spectacular benefits for Katahdin Cedar Log Home owners who add green energy and include efficiency measures inside their homes. Let’s review the energy efficient home improvement measures available beginning this year, which are also applicable to new construction!
Energy Efficiency Home Improvement Credit
This is the resurrection of what was previously called the Nonbusiness Energy Property Tax Credit that expired at the end of 2021. The old, expired credit was worth 10% of the cost of installing insulation, windows, roofing and other improvements to save energy. Credit for 100% of installing energy efficient furnaces, boilers, hot water heaters up to some pretty miniscule limits (between $50 and $500).
The newly revived credit still uses old rules for this tax year. Starting in 2023, the credit will jump to equal 30% of the costs for all eligible home improvements made during the year. This credit is expanded to include biomass boilers and stoves, electrical panels and home energy audits. The new annual limit is $1200 but not lifetime limit, so spreading out qualifying improvements can reap some rewards. Annual limits for certain types of improvements range from $150 for home energy audits to $2000 for electric or natural gas heat pump water heaters or heat pumps, and biomass stoves and boilers. For this latter category, the $1,200 annual limit may be exceeded.
Residential Clean Energy Credit
This extends and revamps the Residential Energy Efficiency Property Credit for solar power and wind power, previously scheduled to expire in 2022, but now extended through 2034. The credit amount jumps to 30% from 2022 to 2032, the credit winds down to 26% for 2033 and 22% for 2034. Removed from this credit are biomass furnaces and water heaters which were shifted to the above credit structure. Added to the residential Clean Energy Act is battery storage power with a minimum capacity of 3 kWh. For example, Tesla Power Wall stores approximately 13.5 kWh.
Alternative Fuel Refueling Property Credit
If adding an electric vehicle is in your plans, another green home improvement is also covered by the Inflation Reduction Act. This credit covers up to 30% of a “qualified alternative vehicle refueling property installed in the home, up to $1000. This translates into equipment purchased to recharge an electric vehicle. This also applies to bidirectional charging equipment, which would allow for discharge of power from a battery pack back into your home electrical grid.
Planning on including some of these additions to your Katahdin Cedar Log Home? You’ll want to check with your dealer or contractor to see about timing and installation to take advantage of these credits and make sure that you as a homeowner will receive the benefits, and not have them revert to the contractor, which was a feature of previous energy tax credits.