How the Inflation Reduction Act can help homeowners save money

In addition to the new green energy tax incentives, the average household will save $170 to $220 per year on electric costs.

Jennifer Gimbel

By

Jennifer Gimbel

Jennifer Gimbel

Senior Managing Editor & Home Insurance Expert

Jennifer Gimbel is a senior managing editor and home insurance expert at Policygenius, where she oversees our homeowners insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

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Getty: Douglas Keister

With the signing of the historic Inflation Reduction Act, homeowners will receive thousands of dollars in tax incentives to improve their home’s energy efficiency in 2022 and beyond — as well as other benefits like electric vehicle tax credits. [1] The legislation is a major win for clean energy and climate change activists, and a push in the right direction toward America’s goals of investing in clean energy technologies, reducing global emissions, and lowering energy costs for consumers.

Here are some of the best new tax rebates that can help homeowners limit their carbon footprint while saving money on taxes, energy bills, and home insurance costs.

Shoppers have saved an average of 30% on their home insurance

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30% tax credit for solar panels and wind energy

Homeowners who install solar panels, wind turbine systems, or other renewable energy equipment will see a 30% tax credit under the Inflation Reduction Act. 

Here’s how much different energy-efficient systems cost and how much you’ll save with the tax credit.

Energy-efficient system

Average cost

Tax credit (30%)

Yearly savings on energy bill

Solar electric system

$15,000 to $25,000

$4,500 to $7,500

$1,500

Wind turbine electric system

$15,000 to $50,000

$4,500 to $15,000

Not available

This tax credit also extends to battery storage technology, so you can purchase a battery system to go along with your solar panels that stores excess renewable energy for later use.

From January 2022 through December 2032, homeowners will be eligible for a 30% tax credit. This drops to 26% in 2033, and 22% in 2034.

Even if you don’t take advantage of these tax credits yourself, it’s predicted that the average consumer will still see a drop in electricity and heating costs annually due to this new mix of energy. The bill will save the typical American household $170 to $220 per year over the next 10 years and seriously reduce the volatility of electricity prices, according to an analysis by the Resources for the Future (RFF). [2]

Up to $14,000 for installing energy-efficient appliances 

Under the bill’s high-efficiency electric home rebate program, you can get a maximum of $14,000 for buying and installing energy-efficient home appliances or making home upgrades. You can also get up to $150 to help cover the cost of a home energy audit to see what types of upgrades might make sense for your particular home.

Energy-efficient appliances or upgrades

Average cost

Maximum tax rebate 

Yearly savings on energy bill

Exterior doors

$700 to $2,000 (with installation)

$500

$125 to $465

Exteriors windows and skylights

$350 to $1,200

$600

$125 to $465

Heat pump for space heating or cooling

$3,875 to $10,000  (with installation)

$8,000

20% to 70% off your typical bill

Heat pump water heater

$2,000 (with installation)

$1,750

$300 to $400

Electric stove, range, or oven

$600 to $3,000

$840

Not available

Electric heat pump clothes dryer

$1,000 to $1,500

$840

$87

Electric load service center upgrade

$850 to $4,000  (with installation)

$4,000

Not available

Electric wiring upgrade

$1,500 to $10,000  (with installation)

$2,500

Not available

Insulation, air sealing, and ventilation upgrades

$5,000 to $12,000  (with installation)

$1,600

$200

Depending on the appliance or upgrade you’re making, you’ll need to meet certain energy-efficiency criteria to be eligible for these tax credits, such as only purchasing appliances with Energy Star ratings.

Additionally, to qualify for these rebates your household income can’t be more than 150% of your county’s median income. And even then, there are limits to how much you can qualify for. 

  • Income below 80% of the area median: Full cost of your upgrades — up to $14,000 rebate

  • Income between 80% and 150% of the area median: 50% of the cost of your upgrades — up to $14,000

You can find your county’s median income by using the Department of Housing and Urban Development’s income limits tool

Up to $8,000 for homeowners who cut down on energy use

The bill also comes with two more incentives for homeowners to cut down on their energy use through two grant programs. Each state would need to apply for the grants that would then trickle down benefits to homeowners based on their income level and energy use. But it will take time for states to set up these rebate programs, according to Lowell Ungar, director of federal policy with the American Council for an Energy-Efficient Economy. [3]

Homeowners who cut their energy use by 35% through home renovations like energy-efficient insulation and HVAC installation would be eligible for a maximum $4,000 rebate. And homeowners who reduce their energy use by even just 20% would see a maximum $2,000 rebate or half the cost of the home renovation project.

These rebates double to $8,000 and $4,000 respectively for low-income households whose income is 80% or less than the area’s median income, and you should be able to mix and match these tax incentives with the rebates listed above to maximize your savings.

Home insurance discounts you might qualify for

Not only can homeowners who decide to make their homes more eco-friendly save money through these tax incentives and lower energy bills, but you might be able to score discounts on your home insurance premiums.

Many home insurance companies will reward you for installing eco-friendly appliances and systems in your home, including:

Insurance company

Home insurance discount

Travelers

Save up to 5% on your premiums if your home is a certified “green home” by the Leadership Energy and Environment Design (LEED) organization

Farmers

Earn discounts off your premiums if your home has green certifications including Energy Star, LEED, or EPA

American Family

Earn discounts off your premiums if you completely replace your plumbing, electrical, or heating systems

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Image: Douglas Keister / Getty

Author

Senior Managing Editor & Home Insurance Expert

Jennifer Gimbel

Senior Managing Editor & Home Insurance Expert

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Jennifer Gimbel is a senior managing editor and home insurance expert at Policygenius, where she oversees our homeowners insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

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