Energy Efficiency Incentives: IRA Tax Credits and How to Use Them

Strib Walker

Navigating Incentives Is Never Easy

Upfront was founded to make the everyday climate fight more affordable. Whether you’re (i) proactively electrifying your entire house for environmental reasons or financial ones, or (ii) replacing your broken gas furnace with an electric heat pump or high efficiency gas furnace, you are supporting the everyday climate fight by making your home run cleaner. 

Upfront supports your investments in more energy-efficient products, systems, and other measures by navigating the incentives to which you are entitled and to put money back into your pockets. Tax credits and rebates are plentiful but can unfortunately be hard to find, figure out, and actually receive. They shouldn’t be. 

In this blog series, we’ll cover the different types of incentives available including (i) tax credits, (ii) rebates, and (iii) how to combine them so that you can navigate the available incentives for your energy-efficient upgrades and know that you’re saving money while spending it. Many are saying it’s the most anticipated trilogy since the Dark Knight, so get your popcorn ready, and let’s talk tax credits (okay, maybe just us)!

IRA Tax Credits Offer Huge Savings

With tax season upon us, it’s time to demystify some of the tax credits that may be available to you if you electrified your home this year. The biggest ones are at the federal level to support the move to less energy, improve air quality, and support the country’s transition away from fossil fuels towards cleaner ones.

Many state governments also offer tax credits that reduce state tax expenses for individuals purchasing these energy-efficient products and systems. A quick “energy efficiency tax credits in [insert your state here]” should put you on the right path to see what tax credits your state may offer. Great news too - you can typically use both the state and federal tax credits, assuming your state’s program isn’t funded by the federal government. It’s important to always check whether or not you can stack incentives across issuers - there’s no hard and fast rule unfortunately, but we’ll get into this more in Part 3 of this series. For the sake of this blog though, I’m going to focus on federal tax credits since they apply to everyone.

Below are three you (and your CPA) should take advantage of if you have any federal tax liability. These credits can reduce the amount you owe in taxes, but if you don’t owe any taxes at all, you won’t be able to benefit. They’re meant to lower what you owe vs. getting cash back. 

As you can see, there’s big savings available to those upgrading their homes with more efficient products, systems, or other measures, so let’s take a closer look at each to see exactly what you need to know.

The 30C Tax Credit

It seems like every TV commercial is showing off a new electric vehicle from a car manufacturer these days. This tax credit is actually aimed at those who have already purchased one and now have their sights set on a home charger for their EV.

This credit has been around for a while, but the Inflation Reduction Act extended it through 2032 and modified it (TL;DR for homeowners: you have to live in a low-income or non-urban census tract to qualify but more on this below) . You can learn more on the IRS’ website, but here’s what sticks out to me:

Key links

For other EV charger incentives, you can check out the offerings from one of our merchant partners like Grizzle-E, Emporia, or NeoCharge. We work with them to make sure a customer knows exactly how much in incentives a piece of equipment will qualify for when you’re on their product pages, and that includes the 30C tax credit!

The 25C / 25D Tax Credits

Similar to the Alternative Fuel Infrastructure Tax Credit (30C), the Inflation Reduction Act amended the 25C and 25D tax credits, both extending them and expanding their coverage of products, systems, and other energy-efficient measures. For both credits, our friends at Rewiring America made a very helpful summary of both, but I’ll provide some more details below.

Energy Efficiency Home Improvement Credit - 25C

For the most accurate and up-to-date information, make sure to review the IRS’ website or check with an accountant, but here are my main 25C takeaways:

Key Links

When choosing a piece of equipment or working with your contractor to do so, make sure the product you purchase meets all of the requirements if you’re expecting to receive the tax credit. Or, take all the guesswork out of the equation and check out one of our merchant partner’s offerings like Chill Mini Splits or Home Outlet Direct. Upfront works with them to ensure you know if you’re buying equipment that qualifies for incentives.

Residential Clean Energy Credit - 25D

Same as above, the IRS’ website is the source of truth for 25D, but for me, I’d want to know:

Key Links

  • Energy Star’s Federal Tax Credits website
  • IRS Form 5695

What Next?

As it relates to tax credits… you filing your taxes, but talk to your CPA and don’t forget to save for your energy efficient choices in 2023! As you plan your home upgrades in 2024, make sure to buy energy efficient appliances so that you can qualify next tax season.

As it relates to this series… rebates! We’ll dive into this whole separate source of incentives that you can tap into to make any energy-efficient upgrade as affordable as possible. Spoiler alert: there’s tons!

Note: this blog post is meant to be informative but is not legal or tax advice. You should consult with your attorney, accountant, and/or tax advisor regarding your particular circumstances.

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