Americans Are Facing Higher Heating Costs This Winter– But The Inflation Reduction Act Can Help
Americans facing higher energy costs can now claim claim hundreds of dollars in tax 2023 rebates through the recently passed Inflation Reducation Act (IRA).
Higher heating costs can be caused by a variety of factors, including rising energy prices and extreme weather conditions. This past year, international markets for oil and natural gas have seen severe volatility due to Russia’s war in Ukraine. Supply instability, combined with oil producers’ unwillingness to temporarily increase production, caused the price of gasoline to spike to near-record levels. For many families, these high costs are a significant burden, making it difficult to afford other basic necessities such as food and healthcare.
Fortunately, the Inflation Reduction Act can help. The act is designed to reduce the impact of inflation on energy bills by providing strategic tax breaks.
Some of the IRA’s tax breaks include:
Energy-efficient home improvement credit
This credit is available for the installation of new doors, windows, skylights, insulation, and heat pumps that more efficiently regulate the temperature of a home. The credit may also cover the cost of a home energy audit, water heaters, and upgrades to electrical systems necessary for the installation of new electric equipment. Eligible purchases are subject to per-item credit limits that, together, may not exceed $1,200 per year. The credit limit for heat pumps is an exception and is set at $2,000 per year.
Residential clean energy credit
Homeowners that install residential clean energy units may be eligible for the residential clean energy credit. This credit is available for the installation of residential solar, small-scale wind, geothermal heat pump, home battery storage, and fuel cell energy systems. Each of these installations is subject to its own set of eligibility criteria and maximum credit limits. If this credit is greater than the taxes owed by a taxpayer in a given year, the excess credit may be carried forward into the next year.
Kitchen updates credit
Gas bill still too high? Upgrading your kitchen from gas powered appliances has never been more affordable. The Inflation Reduction Act provides for a rebate of up to $840 for an electric stove, cooktop, range or oven. As natural gas prices continue to be volatile, making the switch could help save you money on your energy bill.
Taking advantage of these credits will yield significant cost savings for millions of Americans; create new high-paying jobs; and ensure a more secure and stable economy and environment. One analysis estimates that the new law’s residential tax credits alone could save more than 100 million households $37 billion a year on their energy bills. That $37B year for 100MM households can be translated to $370 in energy credits per household.
Overall, the Inflation Reduction Act is a valuable piece of legislation for families facing high heating costs. It provides financial assistance, improves energy efficiency, and helps to protect households from price spikes and volatility in energy markets. If your family is facing high heating costs, it is worth looking into the act and finding out if you are eligible for any of the benefits it provides.