I want to start today by sending my thoughts to those suffering and grieving in Maui. You’ve likely heard about the wildfires raging there (the deadliest in more than a hundred years, actually, with search efforts only just beginning). If you’re at all interested in sending relief aid to those on the ground, the Maui Strong Fund is a great place to start.
It’s moments like these that solicit a little more gratitude for the good in our lives (I’m holding my family a bit closer today).
They also radicalize change, pushing us to improve the way things are done — create better systems, even more efficient ones. Or just change the systems altogether.
Change often comes from difficulty. Sometimes it also comes because of innovation, especially technological advances.
Even now, things are becoming more and more digitized around us. ChatGPT’s “debut” has created a cultural phenomenon and a technological revolution (there are more and more apps and systems harnessing its power every day). You and I can pivot a little easier with those changes. But for bigger entities, it can sometimes take a bit more time to make the switch… and the IRS is no exception.
But some good news here: It looks like the IRS is finally making the move toward a completely digitized correspondence process by the 2025 filing year and will even start going paperless in 2024. That means you can skip the snail mail and start uploading things online. This should speed up processing times and reduce paper consumption significantly. That’s a good incentive for you and all Colorado Springs taxpayers (and for Uncle Sam, too) in the filing process.
This isn’t the only improvement incentive in Washington. Thanks to the Inflation Reduction Act’s clean energy focus, when you start making energy efficient home improvements, you’ll not only save on your energy bill, but you might also be able to save on your tax bill.
Wherever you stand on the clean energy spectrum (and the legislation surrounding it), I bring this up today primarily because I want to keep you in the loop about how it all drips down to your tax standing.
So, here’s what last summer’s legislation means for your home improvement list…
Energy Efficient Home Improvement Kickbacks for Colorado Springs Homeowners
“Home wasn’t built in a day.” — Jane Sherwood Ace, American radio personality
Blistering heat and unusually cold weather can get your heating and cooling units working overtime. That’s totally fine if it keeps you from sweating through the night or teeth chattering in the morning … at least until the bill comes.
Isn’t it funny how we forget about high energy bills until extreme temps crank up the cost of running that unit night and day?
Ideally, you’d started thinking about having a more energy-optimized home before weather extremes demanded more energy use. But, to be fair, the cost of making those improvements might make you hit the pause button. These kinds of repairs ain’t cheap.
But maybe you didn’t know that there are incentives you can take advantage of right now in the form of tax savings. And frankly, that’s a great motivator for replacing your aging AC unit or your drafty, old windows and doors.
There are three potentially big savings incentives you can claim thanks to the Inflation Reduction Act.
1) The Energy Efficient Home Improvement Credit (EEHIC)
The EEHIC is a federal tax credit that’s worth 30% of the cost of qualified energy efficient home improvements, up to a maximum of $3,200 per year. That’s a nice savings to offset those big replacement price tags.
And since the EEHIC is available through 2032, it means you could spread out home improvement costs over the next 10 years to maximize those savings. (Note: After 2024 you can only get the credit if the purchased item has a product identification number and you include the number on your tax return.)
There are some stipulations to claiming the credit of course. To qualify, improvements must be made to your primary North Colorado Springs residence and must meet certain energy efficiency standards.
Plus, it’s important to note that only certain kinds of upgrades actually qualify for the credit. Things like installing new insulation, replacing windows, upgrading your HVAC system, or even adding solar panels.
Figuring out which improvements to make can be tricky. But you don’t have to go at it blind. You could also get a home energy audit to see what actually needs updating. And, that expense also qualifies for the EEHIC.
2) The Residential Clean Energy Credit (RCEC)
This credit was set to expire in 2024 but the Inflation Reduction Act renewed it through 2034. Since the RCEC is a state-level tax credit it’s only available in some states and the amount of the credit varies from state to state — but it can be as much as $5,000 in some places.
Similar to the EEHIC, the RCEC gives you up to 30% of the expense for installing new energy regulating systems including solar, wind, geothermal, biomass, and fuel cell power.
However, keep in mind that it will no longer cover bio-mass furnaces and water heaters. But it will cover battery-storage technology (up to a certain capacity). For a more complete list of what does and does not qualify, the IRS has some FAQs.
3) The Home Energy Rebate Program
While not a tax credit, these rebates can be a boost when you’re making improvements, particularly with your electric appliances. Eligibility depends on your family’s income (should be below 150% of the median for your Colorado Springs area).
Qualifying homeowners can get rebates for stoves and ovens (840), electric wiring (2,500), insulation/air sealing/ventilation (1,600), and heating or cooling with a heat pump (8,000).
Keep in mind that certain limits apply with these depending on your income (we can discuss these more), and the rebates may not be available in your area.
According to the Inflation Reduction Act, a total of $4.5 billion in rebates will be given out to families by state and tribal governments that create their own qualifying programs. The funds will be available up until September 30, 2031.
If you’re making plans to replace things in your home, especially appliances, you’ll want to see if you can get some money back on what you spend.
Looks like now is a good time to consider replacing those drafty sliding glass doors.
I know you want to take advantage of every tax credit and saving option that’s available to you, so I’m here to make sure you don’t miss out. Want to sit down and talk about some home improvement strategies for tax savings, let’s get something scheduled:
Looking out for you,