The Inflation Reduction Act of 2022 aims to promote energy efficiency, combat climate change and incentive the domestic buildout of the EV car industry. The majority of the provisions take effect starting in 2023, but there are some tax credits already in place for items purchased this year. Here's a breakdown of the major provisions in the bill and what you can expect in the coming years.
The Solar Energy and Battery Backup credit is 30% from 2022 - 2032. This credit has no income cap, is one of the few items that is changed retroactively to January 1, 2022, and is typically obtained when filing your individual 1040 tax return (unless you are doing a lease to buy, in which case usually the installer or some other 3rd party will utilize the credit and factor that into the pricing structure).
Separately, for California Residents, the California Public Utilities Commission is about to vote (December 15th, 2022) on a new proposed structure (NEM 3.0) for how people are credited by utilities for the extra solar energy they produce (currently it is a 1-for-1 credit for kilowatt hours produced, which is way better than the proposed 8 cents per kWh for extra production, so it may make sense to get solar ASAP for folks are looking into it (there's a 120-day grandfathering period under the old structure).Electric Vehicles - The $7,500 new and $4,000 used EV credits are limited based on income ($300k for married couples), MSRP of the car ($55k or $80k for SUV/Trucks), and have specific requirements starting in 2023 in terms of % components being sourced from and built in the US. You can get partial credit for a new EV ($3,750) if at least 40% of the critical minerals in the EV batteries are sourced from countries within North America.
Home Efficiency Projects Tax Credit - There's a 30% tax credit, up to $1,200 per year (or $2k per year if installing certain electrical or natural gas heat pumps, water heaters, and biomass stoves or boilers) towards the cost of installing efficient exterior windows, skylights, exterior doors, water heaters, and other items. There are annual caps that apply to specific items (i.e. $500 for doors, $600 for windows and skylights etc.) The new limits only apply starting in 2023, however, here is the list of all items that qualify and their current rebate levels from Energy Star. There is no income limit to this tax credit.
High-Efficiency Electric Home Rebate Program - These will start in 2023 and run through September 30, 2031. There is an income limit that reduces who can take advantage of these rebates (household income can't exceed 150% of your local Area Median Income). Households making 80%-150% of an area's median income can get back 50% of the cost of these projects, up to the limits for individual items and up to $14k total. If you qualify, the program provides upfront rebates of up to $8,000 to install heat pumps that can both heat & cool homes and up to $1,750 for heat pump water heaters. The bill also offers a rebate of $4,000 for upgrading an electrical panel and up to $2,500 for wiring work if a home needs an electrical upgrade related to switching over to electrical appliances. The rebate program is going to be administered by state governments via grants from the US Treasury. States will need to apply and get approval for funding first and it will likely take them months to get the program up and running.
HOMES Rebate Program - This program offers rebates for making efficiency retrofits like up to $1,600 for insulation and HVAC installations. If you cut energy by 20% across your home through these retrofits it is possible to get a rebate of up to $2,000, or half of the cost of the retrofit project, whichever is less. That threshold is raised to $4,000 if you cut energy use by at least 35%. The rebate is doubled for households at 80% or less of their area's medium income. Like the High-Efficiency Electric Home Rebate program, it will be administered by each State. I believe this rebate program is also limited to the 150% cap on medium income, but I'm not completely sure about that yet.