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?

For starters, it’s a good idea to split the IRA into two categories:

  • The first one breathes new life into existing programs like the 25C and 45L but makes them even better. Think of this first part of the act as things you can begin focusing on and planning for right now.
  • The second part of the Inflation Reduction Act adds new, very large energy-saving — including insulation — programs that will need to be approved by your individual state. They offer even bigger incentives for you once they are implemented and set up locally.

Changes to the 25C, 45L & 179D

So, what changed with the 25C? For starters, instead of covering only 10% of the project up to $500.00, the tax credit goes to 30% and up to $1,200.00, with no lifetime cap through the year 2032. So, theoretically, you could have a consumer complete one project on their home in 2023, and then do another in 2024, and gain credit for both.

For the 45L, the original $2,000.00 credit that builders could qualify for has been backdated to cover homes built in 2022. Starting in 2023 and going through 2032, the credit goes to $2,500.00 for homes meeting Energy Star and jumps to $5,000.00 for those that meet Zero Energy Ready Home (ZERH) requirements. Another new benefit to the 45L is that it extends to Multi-Family buildings.

Speaking of Multi-Family, as well as commercial buildings, the 179D tax credit was not only extended, but increased to between $1.88 and $5.00 a square foot for both new construction and existing building retrofits. And while certain projects or states may require prevailing wages be paid to receive 45L or 179D funding, non-profit building owners are now eligible for both credits which should kick off even more work to be done. Since these commercial programs could fill several blogs on their own, for now, more information can be found here.

Just the above tax incentive programs and rebates alone mean the Inflation Reduction Act is a huge win for the insulation industry. That said, there is so much more in the Inflation Reduction Act you should be planning for.

IRA Tax Rebates for Insulation

Now let’s talk about the nine billion dollars that was set aside for two major tax rebate or incentive programs as well as $200 million for contractor training.

The $4.3 billion for HOMES (Home Owner Managing Energy Savings) Rebate Program offers up to $2,000.00 for home energy retrofits with 20-34% modeled energy savings and up to $4,000.00 for when savings is 35% or more. Rebates can double for homeowners with low to moderate income.

The $4.5 billion for High Efficiency Electric Home Rebate Program may not sound like it has much to do with you, but even that Inflation Reduction Act program includes up to $1,600.00 for Insulation, Air Sealing, and Ventilation.

And while these programs can provide lots of capital flowing into the insulation industry, the first thing you want to make sure of is that your state takes advantage of the money. Currently, the money is slated to be split based on population and energy usage by state. That said, if your State Energy Office does not ask for the money, it goes back into the kitty for others to use. It would be well worth a letter or phone call to your SEO to make sure they are planning to take advantage of the program.

Secondly, we can learn a lot from the solar programs by understanding how they have used these rebates to fill pipelines with customers. Marketing rebates can be very effective, but you don’t want to lose the core message of health and IAQ. As more information comes out about the Inflation Reduction Act and states begin laying out the ground rules for funding, IDI will do its best to stay on top of it and help you and other insulation experts take advantage. For more information on the IRA, here’s a great resource from ACEEE with more detailed information on each of these programs.

Learn More About Inflation Reduction Act’s Impact on Insulation

If you would like more information on how you can gear up for the Inflation Reduction Act in 2023, or for any of the insulation materials and products we carry, please reach out to your local branch or contact any of us at IDI, where we look forward to earning your business every day.


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