U.S. residents have thousands of free federal dollars waiting for them — to reimburse home improvements or switch to an electric vehicle. The hope is that the money from the Inflation Reduction Act will entice people to make climate-friendly, energy-efficient changes to their lives.
But taking advantage of that money is a little complicated. The federal government is still in the process of doling rebate money out to the states. California expects to make rebates available in 2024. Other incentives are available in the form of a federal tax credit. Plus, some incentives have strict income caps, while others have no income caps at all.
Let’s break each of those down:
Switching off gas heat
The recent spike in California gas bills might inspire some to consider the switch to electric. The Inflation Reduction Act rebates include:
- Up to $2,000 for installing a heat pump.
- Up to $1,750 for switching to an electric water heater.
- Up to $840 for purchasing an electric heat pump clothes dryer.
This rebate covers 100% of the total cost up to those limits. It’s only available to residents who make 80% or less than the median income in their area. Anyone who makes 80%-150% of the median income can qualify for half off of the total cost, and anyone who makes more than 150% does not qualify.
There are also separate tax credits for windows, doors, insulation, heat pumps, water heaters, electric panels and home energy audits. Residents can receive up to 30% back for those costs through tax credits.
Climate-friendly home improvements
Once again, the focus here is switching from gas to electricity. But home efficiency includes insulation, too.
Financial incentives include:
- Up to $1,200 for upgrades to windows and doors. That amount resets each year, so strategizing and spreading out replacement projects can maximize this benefit.
- Up to $1,000 for electric coil or induction stoves.
- Up to $4,000 for new electrical panels to accommodate all the new electric appliances.
Just like with replacing the gas furnace, the same income caps apply for the rebate, and the tax credit covers up to 30% of the total cost.
This doesn’t just mean solar panels. Battery installation and everything else that is included in a solar system is partially covered under the Inflation Reduction Act. The federal credit will once again cover up to 30% of the cost.
Unlike other home improvements, there is no income cap on this.
Californians will see a significant drop in the state incentive starting April 15, so if they want to maximize their benefit, they should act fast. They can lock in the higher state incentive if solar panels are put in before the deadline. It can take a few weeks to get the paperwork in before panel installation.
There are not a lot of options under the Inflation Reduction Act for renters. But nearly everyone who drives can qualify for an EV tax credit.
The credit for a new EV is up to $7,500. Qualifying new sedans have to cost less than $55,000, and qualifying trucks and SUVs must be less than $80,000. A certain percentage of the materials used to manufacture their batteries also has to come from North America, and it has to be assembled in the U.S.
To qualify for the new car credit, individuals have to make less than $150,000 per year, heads of household need to make less than $225,000, and people filing jointly need to make less than $300,000.
Used cars can earn up to $4,000 in tax credits. They have to cost less than $25,000, and they have to be at least two years old. This credit can get claimed once every three years. The income caps for buyers are half that of new cars.
Currently, buyers have to wait until tax season for the government to pay them back, but the plan is to make the funds available at the point of sale after this year.
Hesitant renters who don’t have a car charger at home might look into California’s right to charge law. It requires certain landlords to provide a car charger when requested.