As we move through Quarter 2, the anticipation surrounding updates to the Inflation Reduction Act (IRA) continues to grow. Many homeowners, landlords, and industry professionals are eager for clear guidance and actionable information regarding the IRA’s incentives and rebates. Unfortunately, the updates from key government agencies like the IRS and the Department of Energy (DOE) have been sparse, leaving many questions unanswered.
In this article, we provide a summary of the most recent information and highlight critical points you need to know. We’ll also direct you to official sources where you can stay informed about the latest developments.
Key Updates on the Inflation Reduction Act
Tax Forms and Energy Credits
The IRS has released Form 5695, the Residential Energy Credits form, which is essential for applying for tax credits related to energy efficiency improvements for the 2023 tax season. While it’s advisable to review the form and its instructions for your own understanding, keep in mind that it could be updated multiple times throughout the year.
Important Note: If you’re advising customers, remember to clarify that you cannot provide tax or accounting advice. Always direct them to consult with a CPA for specific guidance.
Landlords and Energy Tax Credits
One common question is whether landlords can claim the energy tax credit. Currently, the IRS states that the credit is only available for primary residences, meaning landlords cannot claim it for rental properties. However, some rebate programs may allow landlords to participate, but these are typically location-specific and require further research to determine eligibility in your area.
Availability of Rebate Program Funds
The DOE is responsible for distributing funds for various rebate programs under the IRA. However, these funds are not yet available. The DOE is still in the process of conducting outreach, developing program guidance, and hosting listening sessions with key stakeholders. It is expected that later in 2023, funds will be allocated to State Energy Offices and Indian tribes as defined by law. For the latest updates, visit the DOE’s Home Energy Rebate Programs page.
Understanding the Complexity of Rebate Programs
The rebate programs vary by state, and each has its own unique stipulations. For example, the High-Efficiency Electric Home Rebate Program has a specific requirement that the household income must be at or below 150% of the area’s median income. While the DOE has not yet provided explicit guidelines, the U.S. Census Bureau’s QuickFacts tool can be a helpful resource to estimate if a household qualifies.
Energy Audits and IRA Incentives
Energy audits may be required for homeowners to qualify for certain tax credits and rebates under the IRA. While this seems likely, specific details and requirements have yet to be released by the IRS and DOE. The IRS has mentioned a potential $150 tax credit for an IRA-related energy audit, but as of now, there is no line item for it on Form 5695, and it is not included in the form’s instructions. More information is expected to be released later in 2023.
Credit Limits
Another crucial point to consider is the overall credit limits. There is a maximum of $1,200 for the category of energy-efficient home improvements applicable to our industry, and an overall limit of $3,200 for all Energy Efficient Home Improvement Credits for the year. If a homeowner undertakes multiple projects, such as upgrading their HVAC system or installing solar panels, they may reach this limit, potentially limiting their ability to claim credits for additional projects like insulation.
What Should You Do Now?
Given the current uncertainty and evolving information, it’s essential to provide homeowners with accurate, up-to-date resources without making any guarantees. Encourage them to consult with a CPA for any tax-related questions and to stay informed by following updates from official government sources.
As we continue to monitor the situation, we will share new information about the IRA as soon as it becomes available. Stay tuned for more updates.
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Stay Informed with Official Sources
For the latest information on the Inflation Reduction Act and its incentives, refer to these official sources:
- IRS Form 5695 and Instructions: IRS.gov
- Department of Energy Home Energy Rebate Programs: DOE’s Official Website
- U.S. Census Bureau QuickFacts for Median Income Data: Census.gov QuickFacts
