The top 3 climate-friendly tax cuts coming out in 2023 – The Washington Post

The top 3 climate-friendly tax cuts coming out in 2023 - The Washington Post

Commentary

Earlier this year, Congress passed the largest climate bill in history – disguised as the “Inflation Reduction Act.” But while economists say the bill may not reduce inflation much, it could mean one important thing for a country trying to move away from fossil fuels: urging millions of households across America to switch to cleaner energy sources with free money. .

Starting in the new year, the bill will provide households with thousands of dollars to switch from fossil-fuel stoves, ranges and cars to cleaner versions. On January 1, middle-income households will have access to more than half a dozen tax credits for electric heaters, cars, rooftop solar and more. And starting in mid-2023, lower-income households will be able to get a discount on some of those same devices — without having to wait to file their tax returns to get the money back. This handy online resource shows what you may be eligible for depending on your Zip code and income.

But which credits should Americans focus on — and which are best for the climate? Here’s a guide to the key climate-friendly benefits of the Inflation Reduction Act, and how to access them.

Heat pumps — the best choice for decarbonising your home

Tax relief available on January 1: 30 percent of the cost, up to $2,000

Ah, heat pumps – one of the hottest technologies of the clean energy transition. “Heat pump” is a bit of a misnomer for these machines, which are more like super-efficient combined air conditioning and heating systems. These devices work on electricity and Action Warmthrather than creating it, and so can be three to five times more efficient than traditional gas or electric resistance heaters.

“For many people, a heat pump will be their biggest personal impact,” said Sage Briscoe, the federal senior policy manager at Rewiring America, a clean energy think tank. (Heat pumps have become so iconic that Rewiring America even has a heat pump mascot.)

Heat pumps can incur enormous costs and carbon savings. According to a analysis Using data from the National Renewable Energy Laboratory, switching to a heat pump could save homeowners between $100 and $1,200 a year on heating costs and prevent between 1 and 8 tons of carbon dioxide emissions per year. For comparison, become vegan a whole year saves about 1 tonne of CO2 emissions.

But many consumers encounter obstacles when switching to heat pumps. In some areas it can be difficult to find a contractor who is trained and willing to install them; some homeowners report contractors sharing misinformation about heat pumps, including that they don’t work in cold climates. (Modern heat pumps operate in cold climates and can heat a home even when the outside temperature drops to minus -31 degrees Fahrenheit.) Briscoe recommends homeowners look for skilled contractors who understand heat pumps and do their research beforehand to find out which models are best for their home.

Electric vehicles — best choice for reducing car emissions

Tax relief available on January 1: Up to $7,500 depending on the make and model of the car

Income limit: < $150,000 for single petitioners; < $300,000 for joint petitioners

If you’re like the millions of Americans who don’t live in a community with adequate public transportation, switching to an electric car is the best way to decarbonize your transportation. But electric cars can be priceless for many Americans.

Starting January 1, a new EV tax credit will offer consumers up to $7,500 off the purchase of an electric vehicle. For the first few months, Americans will get anywhere from $3,751 to $7,500 off their electric car purchase, depending on the size of the battery in the car.

There are limits, according to the new law. The vehicles must also be assembled in North America, and cars costing more than $55,000 are not eligible, nor are vans or trucks costing more than $80,000. This week the Tax and Customs Administration has a list of vehicles expected to meet the criteria from 1 January.

At the beginning of about March, however, that $7,500 credit will be split into two parts: Consumers can get a $3,750 credit if the vehicle has a battery that contains at least 40 percent critical minerals from the United States (or a country that is the United States). free trade agreement with) and an additional $3,750 credit if at least 50 percent of the battery’s components are assembled and manufactured in North America. Those rules aren’t final yet, so the January 1 tax credit is a stopgap measure until the White House irons out the final version.

What new tax credits for electric vehicles mean for you

Joe Britton, the executive director of EV industry group Zeta, said there is likely one wider group of vehicles that are eligible for the full tax credit in January and February than there will be later in 2023. That’s why he advised potential EV owners to act quickly in 2023.

“I would buy a car in the first quarter,” he said.

Solar energy on the roof — the best choice for generating clean energy

Tax relief now available: 30 percent of the installation cost, no limit

For those who want to generate their own clean energy, this is always possible solar energy on the roof panels. This tax credit has actually been available since the Inflation Reduction Act was signed into law in August 2022. It offers a tax credit equivalent to 30 percent of the cost of installing solar energy on rooftops, with no ceiling. According to Rewiring America, the average 6 kilowatt solar installation costs approx $19,000, making the average solar tax credit about $5,700. (The Inflation Reduction Act also includes a 30 percent tax credit for homeowners who must upgrade their electrical panel for rooftop solar, and a 30 percent tax credit for installing battery storage.)

Solar panels can save homeowners tens of thousands of dollars in energy bills and, when combined with battery storage, can also provide power backup in the event of a blackout or other disaster. For someone trying to move their entire home away from fossil fuels, solar panels become even more appealing: switch everything to electricity, then make the electricity super cheap using the sun.

There are also other options for people who do not have their own home. Tenants can subscribe to one common solar project to lower their electricity bills and indirectly benefit from the tax reductions.

Tips, tricks and words of caution

Many more credits will come out in 2023: for EV chargers (up to $1,000), heat pump water heaters (up to $2,000), and even cash for sealing your home’s doors and windows (up to $1,200).

The most important thing to know, Briscoe said, is whether you qualify for the upfront rebates for low- and middle-income Americans — which won’t be available until later in 2023 — or the tax credits, which will be available on January 1. . (Try this tool.) If you choose the tax credit route, it’s better to spread the upgrades over several years, as there’s an annual cap on how many credits you can claim in any given year. And, she warned, it won’t always be easy: It can be difficult to find the right installers and the right information to use all available government resources.

But in the end, said Briscoe, how you start decarbonizing your life is not as important as ordinary starting.

“It’s like a diet or any other change in your life,” she said. “You have to take the first step, and then another step.”

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