We all know improving the energy efficiency of our home is a good thing. It can lower your bills and lead to cost savings, which as a homeowner, is always a bonus. But did you know that making your house more energy efficient may also save you money on your taxes?
There are potential tax credits in place that incentivize homeowners to make certain upgrades, like adding attic insulation, but recent activity in Washington has expanded and enhanced some of these provisions, meaning your home improvement projects could save you even more money on your taxes.
Read on to learn more about these new tax credits and find out how Terminix® can help you take advantage of them.
The Inflation Reduction Act
In August 2022, President Joe Biden signed the Inflation Reduction Act into law. This sweeping piece of legislation aims to bolster the U.S. economy, support American workers and help combat climate change.
Because it tackles the climate crisis, the law contains a number of steps to help reduce energy consumption and help Americans “go green." Among these are credits for purchasing clean vehicles and expanded credits for making certain energy-efficient upgrades to your home.
According to the Taxpayer Advocate Service (an independent organization within the Internal Revenue Service), the Inflation Reduction Act has renamed and expanded the existing Nonbusiness (or Residential) Energy Property Credit.
In 2022, this provision allows qualifying homeowners to obtain a 10% credit for certain home upgrades, including energy-efficient exterior windows, doors and skylights, and insulation.
Under the Inflation Reduction Act, this credit is now known as the Energy Efficient Home Improvement Credit. It has been expanded through 2032 to 30% of the cost of eligible home improvements (excluding labor costs).
Additionally, the provision previously had a $500 lifetime limit on credit amounts but, in 2023, will now carry a $1,200 annual limit on credits.
What These Changes Mean for You
This new legislation sounds good on paper, but what exactly does it mean for you as a Terminix customer? Well, Terminix offers attic insulation services, meaning you can partner with us to make some upgrades to your home and potentially take advantage of the new tax credits available through the Inflation Reduction Act.
Our specialists will conduct a free inspection to help determine the amount of attic insulation you may need. This depends on several factors, including:
- The amount of insulation you have now
- The temperate zone you live in
- The amount of insulation recommended for your zone
There are three types of insulation available to consumers:
- Fiberglass – This insulation is made of super-fine strands of glass fibers. It was developed in the 1920s and was used to replace asbestos; however, there are some concerns over its overall safety and potential health risks. Additionally, while fiberglass insulation itself won't burn, it is packed in a paper shell that, if not treated, can be flammable.
- Spray foam – Spray foam insulation is made of isocyanates and polyols. These ingredients react to create a foam that adheres to almost any surface and hardens to provide insulation. Unfortunately, it can also trap moisture should there be a plumbing or other leak that wets the area behind it. Because spray insulation is a synthetic material that hardens, it does not attract insects and rodents in the same way that traditional insulation can. However, spray foam insulation is a condition conducive to termite activity - termites can chew through it, and spray foam can hide termite activity occurring beneath it. You should consult your termite provider before installing spray foam insulation - the installation of spray foam may invalidate your coverage.
- Cellulose – This type of insulation is also known as “green insulation" and is made from recycled paper. Cellulose insulation is treated with flame retardant chemicals, and although it is made of paper, it is not any more susceptible to mold and mildew than other types of insulation. It is also be treated with boric acid, is in the product protects the insulation from insect attack.
Terminix specialists can fill gaps in deteriorating insulation by installing cellulose insulation on top of existing attic insulation and attic joists.
What is Insulation R-Value?
The key metric used to measure the effectiveness of insulation is Resistance-Value, also known as R-Value. Essentially, insulation works by keeping heat from passing through it. Insulation is assigned an R-Value number based on how well it stops or prevents the movement of heat. Generally speaking, the higher the number, the better the insulation.
For fiberglass insulation, the R-Value drops as temperatures cool off. Additionally, lighter and less-dense open-cell spray foam insulation has a lower R-Value than closed-cell foam insulation, which is denser.
According to the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy, cellulose insulation has the highest R-Value of the available loose-fill insulation options.
How to Claim an Attic Insulation Tax Credit
So how do you claim an attic insulation tax credit?
First, it's important to note that your insulation will need to meet the R-Value and level of insulation recommended for your area based on criteria in the 2009 International Energy Conservation Code (IECC).
Next, the new attic insulation tax rebate will be available beginning in 2023. That means for qualifying projects you've completed in 2022, the old 10% tax credit will apply.
You can apply for your residential energy credits by completing Form 5695 on your taxes. A tax professional can help you claim these credits and stay abreast of any changes to requirements and procedures that may result from the new law. If you have any questions about the tax implications of installing insulation, please consult a tax professional.
Right now, the best thing you can do is plan ahead for any home improvement needs you might have in 2023 and beyond. That includes attic insulation, so contact Terminix to schedule your free inspection today.
- Inflation Reduction Act of 2022: What it Means for You and Your Taxes
- TAS Tax Tip: What the Inflation Reduction Act Means for You
- About Form 5695, Residential Energy Credits
- FACT SHEET: The Inflation Reduction Act Supports Workers and Families
- Energy Incentives for Individuals: Residential Property Updated Questions and Answers
- Save More on Green Home Improvements Under the Inflation Reduction Act
- What does the Inflation Reduction Act mean for homeowners?
- Biden's inflation law offers up to $14,000 for home upgrades. Here's how to qualify.
- The Inflation Reduction Act Is Now Law—Here’s What It Means For You
- You may qualify for over $10,000 in climate incentives from the Inflation Reduction Act. Here’s when you can claim them