A Step-by-Step Walkthrough of What It Is, Its Importance, and How You Can Benefit

Guest Post by Aileen Hull, Dayton Energy Collaborative

I just finished listening to a podcast from The Carbon Copy, titled “The make or break moment for America’s energy transition.” In the episode, the host, Stephan Lacey talks with two individuals who were both highly involved in the conversation and development of the Inflation Reduction Act (IRA), Jigar Shah, the director of Loan Program Office at the U.S. Department of Energy, and Katherine Hamilton, the Chair of 38 North Solutions. Shah explains the IRA as the “how” for the climate movement. For years, environmentalists have known about climate change and what is needed to avoid the most permanent and damaging consequences. The question has been: how do we make the necessary changes? “[We] have it now!” (Shah, 2023, 5:12). The IRA. We just need the followthrough, the mobilization. “I need everyone to grow a war garden. That’s what I need. I need you to get on the calculator and figure out how to electrify your home. I need you to figure out what electric vehicle works for you and your family” (Shah, 2023, 33:54). Here we go. I am going to help you do just that (minus the garden–though I do highly recommend. We love natural decarbonization.)

Let’s start with the why. Why is it so important to reduce carbon emissions and why is the IRA so monumental?

For the last decade, while one of the largest emitters of carbon dioxide (consistently second only to China), the U.S. has passed no major bills passed to reduce emissions. Carbon dioxide is a greenhouse gas linked directly to causing climate change. In the Paris Agreement, the global community set the goal of limiting global temperature rise to 1.5 degrees in order to prevent catastrophic changes to the climate.

The Inflation Reduction Act (IRA) was signed into law on August 16, 2022 by President Biden. The bill is the single biggest investment to clean energy by the U.S. government to date. In total, the bill invests $370 billion in lowering the costs of energy efficiency upgrades, clean energy, and electrification. It is also part of the Biden administration’s Justice40 Initiative, which means portions of the funds must directly reach disadvantaged communities.

The built environment, which includes human-made commercial buildings, homes, and infrastructure, emits nearly 40% of U.S. carbon dioxide emissions. Emissions come from the energy used for lighting, heating, cooling, and appliances; they also include the manufacture, transport, and construction of buildings. An estimated 30% of electricity for buildings is still generated by coal-fired power plants.

It is not enough to make greener code requirements for new buildings. According to IEA Energy Technology Perspectives, two-thirds of the existing global building stock will still exist in 2040. If we do not retrofit existing buildings, they will continue to emit greenhouse gas emissions. The IRA is designed to cut emissions by 40% and help reach our country’s Paris Agreement commitment. The design of the bill will also reduce Americans’ energy bills and build more resilient homes and buildings.
How will the IRA help us decarbonize our buildings and transportation?

There are three steps needed to decarbonize our built environment. First, we must reduce our energy consumption by improving the energy efficiency of technologies and buildings themselves. Second, we must electrify everything. Eliminate fossil fuel use at the source. Finally, we must work to transition the grid to completely renewable energy sources.

All three steps work best when done simultaneously. At the same time that we improve renewable energy technologies we must also work to reduce the energy needs of our buildings. The IRA creates a way to make these monumental changes happen and happen simultaneously.

Let’s get into the details of the IRA.

The IRA investments are broken into over 100 different programs. I will only focus on the 3 that most directly affect consumers right now: the Energy Efficient Home Improvement credit, the High Efficiency Electric Home Rebate Act (HEERA), and the Clean Vehicle credit.

The tax credits (many of which are available now) and upfront discounts (which will come out late 2023) are for energy efficient and electric appliances, home solar, and even electric vehicles. These credits and discounts are available directly to consumers. This gives us the agency to work against climate change and transform our own homes. Some of these electric technologies are not yet mainstream. If you want to learn more about any of them, see the resources at the end of this post.

The chart below details the tax credits available to all consumers. (The upfront discounts will become available later this year and more information will be provided then. But note that you WILL be allowed to stack the tax incentives and upfront discounts!)

Tax credits
*About: No income limits.*
How they work: Save your receipts for these projects and fill out the IRS Form 5695 when you file your taxes. Most credits are only eligible for filing in tax year 2023, but some will be available for tax year 2022! See the columns below. Note that the percentages are the *percent of the total cost* *that you will be credited.*

*Requirements for the used EVs tax credit:*
*Requirements: vehicle must be at least 2 years old, must be under $25,000, and sold by a dealer*
*Purchaser cannot be original dealer of vehicle*
*Purchaser cannot be claimed as dependent on another taxpayer’s tax return*
*Taxpayer can only use this credit every 3 years*
*A vehicle is only eligible for this credit once*
*Eligibility: must be at or below these incomes: $150,000 for joint return or surviving spouse, $112,500 for head of household, $75,000 for others*

This is a lot of information! Don’t let it deter you! Here are 5 steps for getting started:

Use Rewiring America’s calculator to see what you qualify for based on your household income: https://www.rewiringamerica.org/app/ira-calculator
Get an energy audit on your house (remember you can use a tax incentive to discount this cost!)***
Consult a tax advisor to help prepare to use the tax credits
Collect quotes for installation of new appliances. Many contractors offer free quotes. Get an idea of how much installation of these technologies will cost in your home.
Make long term home electrification plan***

***We at DEC are looking to offer home energy audits and personalized IRA plans soon! Follow our instagram or check our website (linked below) for updates!

If you have any questions, you can always always reach out to me! I will do my best to help out.

Email me at: aileen.hull@daytonenergycollaborative.org

Check out our website: www.daytonenergycollaborative.org

Follow us on Instagram: @daytonenergy

Resources:

Learn more about the IRA:

For a guide to electric, carbon free technologies, read: https://www.rewiringamerica.org/electrify-home-guide

For the full table of the tax credits and more information from the Dept. of Energy, visit: Making Our Homes More Efficient: Clean Energy Tax Credits for Consumers | Department of Energy

For a 33 page detailed outline of the IRA that includes example multiple year plans of how to use the credits, read: https://www.rewiringamerica.org/IRAguide

For information on more of the IRA’s programs, read The Electric Explainer: The Inflation Reduction Act The Electric Explainer: Key programs in the Inflation Reduction Act and what they mean for Americans — Rewiring America

For endless articles on the bill and electrification, visit: www.rewiringamerica.org

Listen to the Carbon Copy podcast episode: https://open.spotify.com/episode/1LtmuhcnlZ0dC8WGMOZEo2?si=916ed8a6f0414502

Don’t know much about EV’s? Here are some more resources and tips for buying your first EV:

Visit Plug in America’s federal EV tax credits resource page: https://pluginamerica.org/policy/what-you-need-to-know-about-2023-ev-tax-credits/

You can call this EV support program: 877-EV-HELP-1 (877-384-3571)

Tips before buying a used EV: