It’s been two years since the nation’s historic climate law, the Inflation Reduction Act, was signed. The IRA is the biggest investment in clean energy projects in U.S. history, and many Americans don’t know about it even though some of its programs could directly benefit consumers, like the Residential Clean Energy Tax Credit.
Flora Cardoni, deputy director of PennEnvironment, looked at recent federal tax data showing that last year more than 30,000 Pennsylvania residents claimed this credit, saving them nearly $150 million on their taxes. The Allegheny Front’s Kara Holsopple talked with Cardoni to learn more about it.
Kara Holsopple: How does the Residential Clean Energy Tax Credit work?
Flora Cardoni: Basically how it works is if you decide to put solar panels on your home, you can get back 30% of the cost of those solar panels via a tax credit.
The tax credit for making your home more energy efficient is the Energy Efficient Home Improvement credit, right?
The Energy Efficient Home Improvement Credit is the credit that applies to appliance upgrades for things like heat pumps for heating and cooling, heat pump water heaters, or geothermal heat pumps. There are electric panel or circuit upgrades, insulation, getting more efficient doors, and all of those are about 30% of the cost.
And then, depending on which appliance or which thing you’re upgrading, there may be dollar amount caps. So for example, for heat pumps, you can get back 30% of the cost up to $2,000 per year. You would do that home upgrade, make sure the heat pump you’re buying or the solar panels you’re installing qualify, and then when you’re filling out taxes for that calendar year, you’ll fill out IRS form 5695. Certainly, an accountant or whoever helps you do your taxes will know more about it and can help you.
I will say, though, that for energy efficiency, there’s additional money that will be flowing through the state in the form of rebate programs. That program should be live in Pennsylvania this winter for things like insulation and air sealing materials, duct sealing, and more.
And a rebate happens after you buy something.
Yes, after you buy something. But you don’t need to wait until you file your taxes to get the return.
You looked at IRS data that indicated over 134,000 Pennsylvanians claimed the Energy Efficient Home Improvement Credit, saving $118 million. So more people are taking advantage of the energy efficiency tax credits?
There’s just a lot more that falls under the Energy Efficient Home Improvement Credit. A lot more in terms of small-scale things you can do to larger-scale things you can do. Whereas, we know putting solar on your home can be a big investment.
Yeah, while these are significant tax breaks, they only really work out for people who can afford the initial investment in, like, a solar array or even a heat pump.
Yes. That’s why we are excited about the rebate programs to come a little bit later, because things like caulking your windows and sealing your home to save energy, which of course, is the cleanest form of energy that energy we don’t use in the first place is good for our planet, but also saving folks money on their utility bills. Those switches are a lot more affordable for the average person to make, and they can still benefit.
At the same time, we hope that people who might not be able to put solar on their roofs themselves can still help advocate for more solar in their communities. Houses of worship or nonprofits that don’t have a tax burden previously weren’t eligible for clean energy tax credits, but now those institutions can receive 30% back on the cost of solar as well.
A ton of those entities don’t know that that money’s out there. So even if you can’t necessarily go solar, you can certainly encourage your church, house of worship or community center to look into it.
How can people learn more about what’s available through the IRA and take advantage of tax breaks?
A lot of organizations like Penn Environment have information about what’s available and why they might consider it, the benefits, and how to do it. For example, Penn Environment and our partners at Environment America have a Clean Energy Home Toolkit, which has guides and resources for things like weatherizing your home, getting a heat pump, or going solar.
There are a lot of great resources that come right from the Department of Energy or the energy.gov website, including a savings hub, a home upgrades hub where you can kind of click on all the 23 different things you can do and see, how to do it. They have a hub for electric vehicles, too.
Why is it important for Pennsylvania specifically to take advantage of these programs?
There are so many reasons for Pennsylvanians to take advantage of these programs. Of course, individuals doing their own parts to tackle the climate crisis by choosing clean energy if they can, or electrifying their homes and vehicles will help us reduce climate pollution, help us reduce air pollution, and protect public health.
The more that people can do that, it creates a ripple effect. The more you see neighbors going solar, you might consider it yourself. The more solar that’s popping up in communities, hopefully, that inspire other action. So we all have our part to do in transitioning away from fossil fuels.
Of course, that’s not enough. We have a big problem in Pennsylvania in terms of state progress toward clean energy. We’re lagging behind neighboring states like New York, New Jersey, and DC that have clean energy or renewable energy portfolio standards where there are commitments to getting in some places 100% clean electricity by 2040.
Here in Pennsylvania, statewide, our electric utilities provide, I think, 4% clean energy. Certainly, individuals choosing clean energy is one important step. But I also would urge everyone to advocate to your state legislators to support proposals to push Pennsylvania forward.
There’s a bill under consideration right now, colloquially known as PRESS, which would establish a portfolio standard of 35% clean, renewable energy by 2035. Requiring utilities to reach that would certainly move things in the right direction.
Historically, some version of clean energy tax credits or other tax credits have existed for a long time, and we’ve seen that’s been a huge driver of solar adoption in the United States. The recent data from the IRS helps to prove that point. People are taking advantage of these things.
But the truth of the matter is that the majority of people don’t know that this money exists, or how they can take advantage of it. And there are huge swaths of the state and huge swaths of people across the country who could be taking advantage of these things, who do have the money to go solar by electric vehicle, who maybe are considering it even, but who just don’t know that these programs exist. So the more that we can educate the public about it, the more people will be able to take advantage and the closer will be to building a clean energy world.
Flora Cardoni is the deputy director of PennEnvironment.
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