Lew Sichelman
Homeowners, which of these consumes more energy in your house: space heating or water heating? Either way, Uncle Sam is ready to help you pay for some energy-efficient upgrades.
The Inflation Reduction Act, signed into law by President Joe Biden a year ago, created two energy-efficiency rebate programs that could pay some, or even all, of the costs of buying Energy Star-rated appliances, adding insulation or otherwise making your home more efficient.
The rub: States will administer the programs, and each one must apply for its share of the $8.8 billion in federal funds earmarked for the rebates. And some states may opt out.
The states’ application window opened this summer, when the Department of Energy issued the program’s guidelines, and will close on Jan. 31, 2025. DoE expects the majority of states will have their programs up and running by early 2024. The rebates will be available to homeowners until Sept. 30, 2031, or until their respective state depletes its grants.
Declined funds will be redistributed to other states.
One state has already indicated it probably won’t participate. Lawmakers in Tallahassee voted to apply for Florida’s allocation – which, at roughly $346 million, is the third-largest in the country, behind California and Texas. But Gov. Ron DeSantis vetoed the measure as “woke.”
The DoE has not been officially notified, so DeSantis could still change his mind.
Some details on what homeowners stand to gain: One program, called Home Electrification and Appliance Rebates, offers up to $14,000; the other, called Home Efficiency Rebates, offers up to $8,000.
Under the former, which is available only to low- and middle-income homeowners, the rebates include $8,000 for an electric heat pump for heating and cooling; $4,000 for an electric load service center; $2,500 for wiring upgrades; up to $1,750 for a heat pump water heater; $1,600 for insulation, air sealing and ventilation; and $840 each for a heat pump clothes dryer and an electric stove, cooktop or range.
Low-income households are defined as those earning 80 percent or less of the area’s median income. Middle-income families earn 80 percent to 150 percent of the median.
Under the second program, rebates for improvements like installing energy-efficient doors and windows, smart thermostats and air conditioners are tiered, based on a household’s energy savings.
For example, low-income homeowners can get back up to $8,000 toward the cost of their projects if they cut energy usage by 35 percent. Generally, though, the rebate is capped at 80 percent of the cost for low-income earners, but states can opt to cover the remaining 20 percent. Middle- and high-income households can get up to $4,000 or $2,000, respectively, with a cap at 50 percent of the cost.
By stacking rebates with other incentives, according to an analysis by the AnnDyl Policy Group, low earners could receive more than $22,000 from the federal government. Middle-income folks could get up to $19,000, while higher earners could get $7,200. Moreover, additional incentives may be available from local utilities or other federal rebate programs.
Home Sale Taxes Could Rise
Speaking of incentives, legislation has been introduced in Congress that would boost the federal gain-on-sale tax back to $500,000 for single filers and $1 million for joint filers, which is where it was prior to 1997.
Currently, single sellers can exclude just half the old amount – $250,000 – in gains from the sale of their homes, while joint filers can exclude $500,000.
In a rare show of bipartisanship, the measure was put forward by Reps. Jimmy Panetta, a California Democrat, and Mike Kelly, a Pennsylvania Republican, in hopes of solving the inventory crisis. The number of houses for sale is at its lowest level in years.
The write-off is just one reason homeowners aren’t selling. For one thing, as soon as they sell, they’re in the same low-inventory boat as everybody else. For another, people are loath to trade their low-rate mortgages for today’s much higher costs.
But the inability to write off more of his gains was a deal-breaker for alert reader Tom Littman of San Jose, California.
The Littmans have lived in their home for 36 years; their kids are grown, and they would very much like to sell and downsize. But they would be hit with a capital gains tax on the “significant” profit, over and above the current write-off.
Instead, like many others, they elected to stay put.
GenZ Doesn’t Get Homebuying
When a third of GenZers surveyed admit they don’t know how to change a lightbulb, it would appear that some respondents are pulling pollsters’ legs.
These troubling findings ring true, though: Nearly half of the respondents surveyed by Clever Real Estate are not sure they understand the home-selling process, and more than a third are not confident in their understanding of the buying process. Worse, a third don’t know what a down payment is and more than half are clueless about escrow accounts.
For the uninitiated, a down payment is what buyers pay upfront for a house. Escrow has two meanings: It can be an amount of earnest money held by a neutral third party until closing, or it can be the portion of your monthly payment that is set aside for homeowner’s insurance and property taxes.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
