How homeowners can benefit from the Inflation Reduction Act
by Michael Mahan | 5 min read
Historic legislation lowers cost of home electrification
The Inflation Reduction Act (IRA) could easily have been called the Climate Change Reduction Act. With $369 billion slated to help ensure energy security, reduce carbon emissions, increase energy innovation, and support environmental justice, the IRA is the largest investment ever made by the United States to combat climate change.
According to the White House, the IRA is projected to reduce carbon emissions nationwide by approximately 40% by 2030, strengthen climate resilience, protect nearly two million acres of national forests, and reduce greenhouse gas emissions by about one gigaton, or a million metric tons, also by 2030. That’s 10 times more climate impact than any other single piece of legislation enacted by the United States Congress in its 233-year history.
So what is the IRA and what does it mean for homeowners? Put simply, incentives included in the act will help people:
- Lower their energy bills
- Improve their home’s energy efficiency
- Reduce their carbon footprint
- Gain access to resilient power sources
Moreover, the IRA will allow more Americans to participate directly in an electricity-driven revolution that puts a zero-carbon, zero-waste, and zero-emissions future within reach for all of us.
How the IRA makes sustainable home upgrades more affordable
The IRA provides specific incentives across the entire energy chain from grid to plug, with substantial savings opportunities for improvements made within homes. The legislation sets aside $9 billion for rebates that will make it easier for homeowners in low- and middle-income households to afford energy-efficient appliances such as heat pumps and induction stoves. For example, the new High Efficiency Electric Home Rebate program will provide upfront discounts on electric stoves, heat pumps, breaker boxes, electric wiring, and more for low- and moderate-income households seeking to electrify their homes.
Additionally, the IRA expands, extends, and modifies a handful of tax credits that will provide incentives to make clean energy improvements to their homes, purchase electric vehicles, install residential solar and battery storage systems, and more. These changes to the tax code include:
- The Energy Efficient Home Improvement credit (Section 25C), which allows households to deduct from their taxes up to 30% of the cost of upgrades to their homes, including installing heat pumps and upgrading their breaker boxes to accommodate additional electrical loads.
- The Clean Vehicle credit (Section 30D) and a credit for previously owned clean vehicles (Section 25E), which gives a credit worth up to $7,500 for new electric vehicles and a credit worth up to $4,000 for used electric vehicles, respectively, to help everyday Americans afford EVs. These credits require to meeting certain income thresholds.
- The Residential Clean Energy credit (Section 25D), which re-ups an existing program allowing households installing solar panels to deduct 30% of the cost from their taxes. The credit is guaranteed for 10 years and now includes residential battery storage systems.
- Upfront discounts on electric stoves, heat-pump clothes dryers and water heaters, electric wiring, and more.¹
The IRA will boost the already-rising popularity of sustainable homes as consumers invest in smart-home technology to monitor their energy use and reduce their utility bills. By lowering the upfront costs of making a home more energy efficient, the legislation puts electrification and digitization upgrades within reach for more Americans, which will enable them to realize the long-term savings that these renovations make possible.
Home electrification starts with the panel
At the heart of any sustainable home – and home electrification – is the electric panel. It may not seem as exciting as solar panels or an EV charger, but it is the intersection of our energy source and energy consumption – making it a critical piece of home electrification. In fact, to fully realize the benefits that home electrification offers, many homeowners may need to upgrade their panel.
While many modern homes have 200-amp service, it’s not uncommon for residences built 50 or more years ago to have 100- or even 60-amp service. Such panels were more than enough to power lifestyles that involved far fewer electric devices than we are accustomed to today. Our homes are now dominated by plugged-in must-haves ranging from big-screen televisions and computers to smart phones and appliances. Adding electric vehicle chargers, heat pumps, and solar panels will place even greater demands on a residence’s electrical capacity.
To facilitate the transition to complete home electrification, Schneider Electric has launched and innovative electrical panel – the award-winning Square D™ Energy Center. Those making electrification improvements to their home may be able to utilize rebates and tax credits to upgrade their load centers, including upgrades to our Square D™ Energy Center. For example, a taxpayer living in a low- or moderate-income household may be eligible to claim a rebate of up to $4,000 at the point of sale for their new electrical panel, depending on their income level and state requirements. In addition, the 25C tax credit may offer a homeowner making electrification upgrades to their existing home a credit of up to $600 on an electrical panel upgrade that enables additional, eligible upgrades, like a new heat pump or central air conditioner.
The panel is solar and EV-ready right out of the box, making it even easier to take advantage of adding those elements to your home. Generators and batteries can be easily added to cover a home’s backup power needs as well. And with the integration of the Wiser Energy™ Home Power Monitor, the Energy Center lets homeowners:
- Monitor energy use in real time from their phone, helping them to reduce their consumption
- Receive custom safety alerts for specific home activities such as when garage doors open
- Turn off appliances and devices remotely to reduce energy use and protect their home
- Control security systems, alarms, and more
Game-changer for America’s energy future
Annette Clayton, Chief Executive Officer of Schneider Electric North America, hailed the IRA as “a game-changing investment in America’s clean energy future,” noting that it will help overcome present-day challenges such as rising energy costs and the effects of climate change while empowering homeowners to achieve their sustainability goals. “As one of the world’s most sustainable companies, we are excited about this pivotal piece of legislation,” Clayton said.
With passage of the IRA, Schneider Electric is poised to help homeowners translate the legislation into residential upgrades that allow them to adopt sustainable practices, save money, and reduce their carbon impact while living more comfortably and intentionally. And with the Square D™ Energy Center, Schneider Electric provides a complete smart and sustainable home solution, plus expert guidance and support.
“Schneider Electric stands ready to help implement the Inflation Reduction Act while ensuring homeowners qualify for all tax credits and rebates available to them,” Clayton said.