OPM. Other People’s Money. Or, perhaps more accurately, your money.
Yes, we’re talking about government funding. Your tax dollars and how to recapture some of your tax dollars to help grow your business.
Last year the government passed the Inflation Reduction Act (IRA). Core to this government program is rebates to support “energy security and climate change.” Much of it has to do with HVAC rebates / incentives and electrification rebates / incentives.
Distributors that effectively communicate these opportunities to their salespeople, their contractors and, in some cases, to their contractors’ customers (via marketplace marketing) can utilize this program to support their growth goals.
Coupling these programs to generate sales with supplier funding to off-set marketing expenses, could be a win-win for distributors.
To learn more about the benefits of the IRA program, we asked Sarah Hagy, Executive Director of EAP (Electrical Association of Philadelphia) which has members from all levels of the electrical and HVACR channel to share what she is communicating to her members.
The Inflation Reduction Act, Incentives and Credits Available for the Energy Industry
$369 billion dollars. That’s the value of the incentives and credits made available through the “Energy Security and Climate Change” provision of the Investment Reduction Act of 2022, which represents “the single largest climate investment in American history.” With a goal to reduce U.S. carbon pollution 40 percent below 2005 levels by 2030, sales professionals working within the energy industry should become familiar with these incentives, some of which will be in place for the next decade. There are several resources available to learn more about each incentive based on product categories and incentive types. EAP has provided a summary of these resources below, allowing your team to quickly locate information.
And if you’d like to read the entire law, click here.
Residential Incentives
Energy Efficiency Home Improvement Tax Credits: 2023 – 2032
These residential tax credits will be equal to up to 30% of the costs (or maximum dollar amount allocated by product category) for eligible home improvements made during the year. The overall annual credit limit is $3,200, but consumers should closely review credit requirements by product type as there are nuances. Each product category that electrical and HVACR contractors may work with is linked below. (There are appliance and building envelope incentives as well.)
- Small Wind Turbines
- Air Source Heat Pumps
- Central Air Conditioners
- Furnaces (Natural Gas, Oil, Propane)
- Boilers
- Heat Pump Water Heaters
- Water Heaters (Natural Gas, Oil, Propane)
- Geothermal Heat Pumps
- Fuel Cells
- Electric Panel Upgrade
- Solar Energy Systems (Solar Water Heaters and Solar Panels/ Photovoltaic Systems)
In addition, certified home energy auditors can offer a Home Audit home tax credit.
Consumer IRA Savings Calculator
Customers can estimate their savings using Rewiring America’s Inflation Reduction Savings Calculator https://www.rewiringamerica.org/app/ira-calculator
Residential Clean Energy Credit (formerly the Residential Energy Efficient Property Credit)
This tax credit is now worth 30% (previously 26%) of the cost to install qualifying systems that use solar, wind, geothermal, biomass or fuel cell power to produce electricity, heat water or regulate temperatures in residences. This credit is available through 2032, and then will fall back to 26% for 2033 and 22% for 2034.
Clean Vehicle Credit
This credit is worth $7,500 credit for new EVs and $4,000 credit for used EV purchases.
High-Efficiency Electric Home Rebates (formerly Zero-Emissions Homes Act)
This point-of-sale rebate is available to low-and-moderate income families who purchase energy-efficient products whose family’s total annual income is less than median income where they live. Low-income residents can receive 100% (up to $14,000) of qualifying project costs (materials and installation) and moderate-income residents can get 50% off their purchase (up to $14,000) on qualifying project costs (materials and installation). Learn more about these rebates here.
2022 Tax Credits
The IRA also extended some credits for the 2022 tax year. More information can be found here.
Builder/Developer and Commercial Incentives
(The Commercial page currently reflects 2022 credits)
New Energy Efficient Home Credit
New and single-family homes, as well as homes that undergo a “deep retrofit” may qualify the developer up to a $5,000 tax credit.
Commercial Buildings Energy Efficient Credit
This incentive offers businesses who achieve 25% – 50% reduction in energy use a tax credit worth $2.50 – $5.00 per square foot. (View The Electric Explainer linked below for more information.)
Resources:
- IRS Fact Sheet – Clean Vehicles Credit
- IRS Fact Sheet – Energy Efficient Home Improvements and Residential Clean Energy Property Credits
- Energy Star Equipment Tax Credits for Residence
- EAP HVAC Rebates (2023 Program to be announced shortly)
- An Overview of the Climate and Electrification Provisions for Disadvantaged Communities in the IRA
Sources:
- Save More on Green Home Improvements Under the Inflation Reduction Act
- The Electric Explainer: Key programs in the Inflation Reduction Act and what they mean for Americans
- Energy Star Equipment Tax Credits for Residences:
Interested consumers should consult their tax professional prior to any purchases to ensure they meet all qualifications necessary to obtain credits.
Sarah Hagy, CAE, is the Executive Director & CEO of the Electrical Association of Philadelphia (EAP), a nonprofit trade association in the Greater Philadelphia region connecting energy industry stakeholders with influencers and decision-makers to pursue mutually-beneficial collaboration that shapes a safer and more sustainable energy future.
Take Aways
- HVACRTrends would like to thank Sarah for sharing this information.
- This is the information Sarah is sharing with her contractor members, hence if you are a distributor, it is directly applicable to your customers.
- As a distributor, educating your salespeople on the various programs that could be applicable to your business could be a significant benefit.
- Developing a plan to capture sales utilizing the IRA? Determine which product categories are most applicable to you and then engage with a / some key suppliers to develop a coordinated, comprehensive strategy where you can blitz customers, and their customers, with rebate / incentive information as well as applicable product information. Some distributors / manufacturers will even get creative and further enhance some of these incentives!
The residential market is expected to have a slowdown this year, especially single family new construction in most markets, due to interest rates. Utilizing OPM may be a way to stimulate demand and generate incremental revenues from the renovation / remodeling market and/or the service market. Arming your salesforce and your contractors with the tools to be successful can be a strong incentive for you.
