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First Steps for Contractors in 2022
The Inflation Reduction Act has been signed into law recently. The $370 billion allocated to environmental initiatives is the largest investment the government has ever made to fight climate change, and it is expected to reduce US greenhouse gas emissions by 40% by 2030.
There's a lot to celebrate in this groundbreaking legislation. If you're an HVAC, solar, or home service contractor, you can rethink how you market and sell your services. Let us summarize some of the key takeaways from the proposed law so you don't have to read it all.
Contractors who wish to enhance their energy efficiency services and promote their home electrification services will benefit from the rebates and grants. Before they can be made available, however, many implementation questions must be addressed. As for now, keep them on hand, as they'll be crucial in the near future.
Closer on the horizon are the tax credits, particularly the 25C credit for energy-efficient home improvements that will increase to 30% in 2023. Inflation Reduction Act coverage and public awareness present an opportunity for you to start preparing now. Our team is here to help you effectively market these savings to your customers.
Understand the Tax Credits
The Inflation Reduction Act's most immediate impact will be on several industry-related tax credits, which have been extended or changed.
25C Tax Credit - Energy Efficiency Home Improvements
What It Does: Offers homeowners a tax credit for energy efficiency upgrades.
Takeaways:
- The credit was revived and retroactively applied to 2022 (at 10%).
- Through 2032, the credit will increase to 30% of total installation costs
- A lifetime cap of $500 will be replaced by a cap of $600 per measure, with a total limit of $1,200 per year (exceptions are listed below).
- Eligible services and home improvements include:
- Heat pumps and heat pump water heaters ($2,000 credit)
- Insulation and air sealing
- Energy audits ($150 credit)
- Energy-efficient HVAC systems (including furnaces, boilers, and central AC)
- Electrical panel upgrades
- Energy-efficient windows and doors ($500 credit for doors)
- Roofs are no longer eligible
45L Tax Credit - Energy Efficient Home and Multifamily Credit
What It Does: Provides tax credits to builders who build energy-efficient structures.
Takeaways:
- Credit revived and made retroactive for 2022 (at original $2,000)
- Starting in 2023, the credit increases to $5,000 for single-family, multifamily, and manufactured homes through 2032
- Higher energy-efficiency standards for builders to meet
Federal Solar Tax Credit (Investment Tax Credit)
What It Does: Provides a tax credit for the installation of solar PV systems on residential and commercial properties.
Takeaways:
- Increases 2022 credit to 30% and makes it retroactive for all installations this year
- Credit extended at 30% through 2032; will step down in 2033 and be eliminated for residential in 2035
- Starting in 2023, stand-alone battery storage qualifies for credit
Rebates & Training Grants
Another major component of the IRA relevant to our industries is $9 billion set aside for rebate programs and contractor training.
Rebates for HOMES (Home Owner Managing Energy Savings) worth $4.3 billion
- Rebates up to $4,000 for home energy efficiency retrofits with modeled energy savings of 35% or more (or $2,000 for 20-34% energy savings)
- Services can include insulation, air sealing, heat pump/HVAC upgrades, and more
- Additional rebates up to $8,000 available for low and moderate-income homeowners
- Rebates cannot be combined with other federal grants or rebates
Grants to state-based home energy efficiency contractors worth $200 million
- Provide training for contractors who install energy efficiency and electrification improvements in homes
- Funding through September 2031
$4.5 Billion for High-Efficiency Electric Home Rebate Program
- Low- and moderate-income homeowners can receive rebates for energy-efficient upgrades and electric system purchases
- Maximum rebate of $14,000; individual rebates are as follows:
- Heat pump water heaters: $1,750
- Heat pump HVAC systems: $8,000
- Electric stoves: $840
- Heat pump clothes dryers: $840
- Electrical panel upgrades: $4,000
- Insulation, air sealing, and ventilation: $1,600
- Electric wiring: $2,500
- Rebates cannot be combined with other federal grants or rebates
As you can see, there are a lot of opportunities for your customers to save, and it will be critical to make your customer-facing teams aware of what’s available. An understanding of the available tax credits and upfront discounts will give you an advantage over your competition as it allows you to work with the iMarket team to identify marketing opportunities through each stage of the the sales funnel.
If you are new to iMarket Solutions and want to learn more about we can support your sales goals, and leverage your current customer base, our team is here to help you! Contact us for your free consultation.
