The Inflation Reduction Act & The Future of Insulation Rebates
Your ultimate guide to understanding what you need to know about how the Inflation Reduction Act (IRA) will impact the insulation industry.
What is the Inflation Reduction Act?
The US Inflation Reduction Act (IRA) was passed in August 2022 with the goal of lowering the cost of living for American families. According to the IRS, “The Inflation Reduction Act covers new and reinstated tax laws that will affect individuals and businesses, including a number of credits and deductions.”
The IRA bill aims to lower costs for families, while combating climate change through financial support for individuals and businesses to retrofit, and build healthier buildings that use less energy. This has a positive impact on the insulation industry in two specific ways:
Commercial Tax Credits
The first portion of the Inflation Reduction Act will impact the insulation industry by extending pre-existing national tax credits that were set to expire, providing more incentives for commercial building owners who want to improve the energy efficiency of their building(s).
- 45L Tax Credit will provide a $2,500.00 credit for all new or substantially reconstructed residential and multi-family buildings that meet Energy Star certification, or $5,000.00 for those that meet DOE Zero Energy Ready Home (ZERH) program requirements.
- 179D Tax Credit will be made available to new-build or extensive-retrofit commercial buildings. Business owners will receive a tax credit between $1.88 and $5.00 a square foot. The amount is determined by the percentage improvement against a baseline model, increasing incrementally. For those that meet wage and apprenticeship requirements, a bonus deduction will be made available.
Residential Tax Credits
The second portion of the Inflation Reduction Act will provide homeowner rebates on a state-approved basis through a number of new programs. The specifics for each vary from state to state. If you live in a state that hasn’t accepted the new IRA rebates, we recommend reaching out to the Building Performance Association (BPA) which is leading an affiliate model program across the US to make our voices heard.
- 25C Tax Credit will increase to 30% or up to $1,200.00 of job material costs with no lifetime cap through the year 2023 for residential retrofits. Homeowners and those who own residential multi-unit buildings can plan ongoing retrofits that will help the energy efficiency of their properties and continue to receive tax credits every year through 2032.
- 45L Tax Credit will provide a $2,500.00 credit for all new or substantially reconstructed residential and multi-family buildings that meet Energy Star certification, or $5,000.00 for those that meet DOE Zero Energy Ready Home (ZERH) program requirements.
- HOMES (Home Owner Managing Energy Savings) Rebate Program will provide an average incentive of $2,000.00 for 20% increased energy efficiency and $4,000.00 for 35% increased energy efficiency (although these rates are doubled for households with income below 80% if the area median income (AMI). To receive the rebate, a contractor will do an energy assessment of the home, design a retrofit package, and model the savings projected.
- High-Efficiency Electric Home Rebate Program includes up to $14,000.00 per household for insulation, air sealing and ventilation.
- Weatherization Assistance Program provides rebates for homes owned or occupied by low-income persons, including an average of about $8,000.00 of funding per house or apartment to improve the dwelling, reducing total residential energy expenditures.
Incentives by Household Income
State incentives may use household income to determine the amount the homeowner will receive. Income is determined as:
- Low-Income Households are at or below 80% of the Area Median Income, including those qualifying for WAP at under 200% of the Federal Poverty Line
- Moderate-Income Households are between 80% and 150% of the Area Median Income
- Market Rate Households have an income of over 150% the Area Median Income
Though funding options will vary state by state based on existing state and utility programs, understanding these household income levels will be vital in offering stackable rebates and tax credits so your customers receive the greatest amount of money possible. Combining federal, state, and utility dollars will be a valuable tool to help those homeowners who can benefit from these programs but worry about how they will pay for them.
Important IRA Dates
September 30, 2023: State Deadline for Grant Applications
State applications are due. States can receive up to $150 mil. from the US Department of Energy (DOE)’s State-Based Home Energy Efficiency Contractor Training Grants Program. This program is to support the education, training and certification of those working in residential energy efficiency.
January 31, 2025: State Deadline for Program Funding
Applications are due from states looking to receive funding from the US DOE for rebates. This funding includes rebates for the Home Efficiency Rebates Program (HOMES) and the Home Electrification and Application Rebates Program (HEEHR).
December 31, 2032: Tax Credits Expire
Tax credits are good until December 31, 2032, after which time they are set to expire (as of September 2023). Any services done between now and December 31, 2032 can be used on annual income tax forms to gain the customer tax credit, unless the IRA is extended.
Learn More About the IRA
Podcasts
View AllInflation Reduction Act: Improving Your Insulation Workforce & Working With State Energy Offices
The Inflation Reduction Act is set to provide a lot of subsidies and other resources to insulation contractors and their workforce. But unless you know the details, you may not be able to maximize them for your business. That’s why we’ve invited Xavier Walter on the show to chat with IDI’s Business Development expert Ken Allison. They explain how you can access Inflation Reduction Act benefits and how those in the insulation industry can best utilize them to hire and retain the best talent in their workforce.What Contractors Should Know About Hiring Undocumented Workers: A Conversation With Immigration Attorney Jorge Molina
To say nothing gets built without labor is an understatement, and this is particularly true as we watch the Inflation Reduction Act (IRA) come into play. Since the IRA provides credits and rebates for families and businesses looking to lower their property’s energy use, we’re going to see an increase in demand for construction and the labor contractors will need to get the job done — particularly in industries such as insulation.The Most Underused Contractor Tax Credits: Understanding 179D Benefits with Bill Harbeson
The Inflation Reduction Act came with a lot of changes to the ways contractors and their clients handle tax credits, manage money and build their businesses. The IRA bill includes not only new programs, but also adjustments to regulations and extensions around existing benefits like the 179D. Knowing what’s new, what’s changed and what it all means for your business is critical for any contractor wanting to make the most of their money.Getting Rebate Ready: Making Marketing Improvements for the Inflation Reduction Act
For contractors and consumers, 2023 is the “year of the rebate” due to the Inflation Reduction Act. Potential customers are starting to learn how they can utilize these rebates to start new projects. This raises the question: what improvements can you make for your marketing in order to capture the business of prospects wanting to take advantage of the Inflation Reduction Act?Blogs
View AllInflation Reduction Act – BPA Webinar
Did you know the Inflation Reduction Act’s (IRA) HOMES and Electrification rebates are going to require you to be able to income qualify your customers? If you plan on offering your customers rebates or incentives from the IRA bill, make sure you watch the highlights from the latest Building Performance association webinar.The Inflation Reduction Act’s Impact on the Insulation Industry
Regardless of whether you are into retrofit or new construction, the Inflation Reduction Act (IRA) is a major windfall to the insulation industry. The incentives really don’t start until 2023, but it is already gaining consumer recognition both online and in the news. But what does the Inflation Reduction Act include?The New 179D & Other Great Ways Your Customers Can Fund Commercial Energy Retrofit Projects
2023 is here and will likely begin the greatest number of deep energy retrofits ever performed on commercial buildings in the US. Yes, the new 179D is very generous, and likely to motivate many building owners to jump in. That’s why the first R-Value podcast of 2023 is diving into the tax credit, as well as this blog, which will hopefully help you, help your customers, find the money.Getting The Most Out of The 25C Tax Credit
Consumer online searches have already started trending upward on how to take advantage of the 25C tax credit, as well as other tax incentives and federal rebates.Videos & Informational Flyers
Learn more about how your company can help clients gain the best IRA rebates and credits with our relevant videos and flyers.
Stay Competitive with IDI’s Classes & Training
Because the Inflation Reduction Act bill requires extensive knowledge and reporting on the ways in which a project positively impacts the energy performance of a building, it’s important that your team of insulation installers is prepared with the latest best practices. Whether your team has years of experience or is new to the insulation business, IDI’s classes and training will help you stay ahead of the competition while providing a valuable service to your employees.
IDI’s comprehensive training classes cover the complete insulation process, wholesale fiberglass insulation, building science and codes, health and safety training, and everything else you need to increase your productivity and profits.
Get help navigating the IRA guidelines and ensure your team is prepared to aid new clients with IDI’s classes and training.
State Impact on the IRA
While existing and reinstated programs already provide federal tax credits, to fully benefit from the IRA bill, states need to individually opt-in to the new federal rebate programs. New programs are expected to be implemented in mid to late 2023 depending on your state.
If you need help navigating your state’s IRA rebates, our local offices stay up to date on the latest information. Contact your local sales rep to learn more.
Essential Accessories
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The Industry’s Insulation Experts
Since 1979, IDI has provided insulation contractors with a wide selection of quality supplies and equipment. As a family-owned and operated company with locations around the country, we have helped over 3,000 independent insulation contractors and distributors successfully profit and grow their own businesses nationwide.
When you need more than an insulation distributor, call IDI. We provide resources, services, support, products, and professionalism that help you succeed.
This information is meant to be educational and may not reflect changes made to the IRA bill or individual state legislature. For more timely advice on how your company can benefit from the IRA, contact your local IDI office.