What Your Clients Should Know About the Inflation Reduction Act

The Inflation Reduction Act makes $9 billion in rebates available for homeowners in support of energy-efficiency home improvements. With up to $14,000 in rebates available per household, it's time to spread the word on some of the IRA’s provisions that will reverberate for years to come in our residential built environment.

New Home Improvement Opportunities

To make the IRA funds available to their residents, each state must develop its own implementation plan. Although they won’t be approved until some time next year, you can prepare now by informing your clients about four key programs within the bill:

• Extension of the Clean Energy Tax Credit:
  • 30% credit for solar through 2031 and batteries included beginning in 2023; stepping down to 26% for 2032-2033 and 24% for 2033-2034
• Extension of 25C Tax Credit:

  • Pays up to 30% of the costs for certain improvements and expands credit up to $1,200/year

• Home Owner Managing Energy Savings (HOMES) Rebates:

  • Rebate amount of $2,000 or $4,000, based on projected energy savings

• High-Efficiency Electrified Homes Rebates:

  • Max rebate per home is $14,000, specific amounts designated for improvements that will assist in the electrification of a home (e.g., induction stoves, water heaters, heat pumps, electric service upgrades, etc.)

Each of these programs provides a significant tax credit or rebate for making energy-efficiency or renewable energy improvements, such as HVAC, insulation, water heating, windows/doors, solar, battery storage, and more.

Homeowners can combine a tax credit with a rebate, but they cannot combine rebates for the same installation. Also note that the legislation allows states to increase the size of the rebate for low and moderate income households, and the High-Efficiency Electrified Homes rebate has an income requirement of 80%-150% of annual area median income. If the property owner's income is below 80%, 100% of the install cost can be covered.

The HOMES rebates do not have an income requirement, and they do not require the property be owner occupied. They do, however, require the install package to both meet an energy savings threshold and come with a third-party certification the likes of what Pearl Certification provides. The point of requiring the certification is twofold: First, as a quality assurance measure, and second, (this is mentioned directly in the legislative language), to help capture the value of the improvements for future appraisal. Download Pearl’s IRA infographic highlighting the primary home improvement components of the legislation.

Be Heard

Pearl Certification works very closely with the governmental groups that will draft the specific regulations for the program. We are uniquely positioned to ensure our network has a voice in this very important process. To volunteer for a regional roundtable and get involved with the IRA conversation within your state, please email us at [email protected].

Pearl will guide you on your journey to understanding IRA benefits and how to effectively deliver the information to your clients. With over 700 pages in the IRA, there is a lot of information to decipher, but you can rest assured that Pearl Certification will provide you with accurate information and guidance you can trust. We are committed to keeping our Pearl Real Estate Network Members informed as new developments arise. If you haven’t already, sign up below to join the Pearl Real Estate Network and receive vital resources about the IRA.