There are many choices when it comes to installing insulation in homes or businesses. Insulation helps improve energy efficiency, creates comfortable interiors, and can even improve fire protection and reduce noise transmission. Over time, insulation installation often provides a positive return on investment.
Tax credits are a great way to help offset some of the initial material and installation costs associated with insulation. There are several opportunities for homeowners and even residential and commercial builders to save money with tax credits, rebates, and other incentives from utility companies and the federal government.
The insulation experts at your local TruTeam branch can help you choose and install insulation while also helping you collect any relevant tax credits or rebates.
Insulation & Energy Efficiency
One of the major benefits of insulation is its ability to make homes and businesses more energy efficient. As a thermal barrier, insulation helps reduce heating and cooling bills and reduces demand on HVAC systems. Sealing air leaks and adding insulation improves comfort and decreases energy costs, particularly in the summer and the winter months. The Environmental Protection Agency (EPA) estimates that homeowners may save 15% on HVAC costs by installing insulation and air sealing their homes.
Increasing energy efficiency also allows homeowners to claim certain tax deductions. We’ll explore more details on these tax credits in the sections below, including how to qualify, how much you can receive, and how to claim the deductions.
R-Values for Insulation
In order to understand how much insulation is right for a home or business, it’s necessary to understand R-values for insulation. R-value is a measure of thermal resistance, and higher R-values indicate greater insulating effectiveness. In order to qualify for certain tax credits, homes and businesses need to meet minimum levels of insulation.
For most homeowners, this means adding insulation with R-values between R-19 and R-30. TruTeam’s insulation installers can help you determine the necessary R-values for your home or business, based on your project needs, budget, and geographic location.
How Do Homeowners Know if They Need More Insulation?
Insulation is a cost effective way to achieve lower utility bills. Nine out of ten existing homes in the United States are under-insulated. In a home, it is important to have the right type and amount of insulation in attics, walls, floors, crawl spaces, and basements.
For optimal energy efficiency and comfort, many homeowners also add insulation to garages. In under-insulated spaces, homeowners may notice temperature variations between rooms, drafts, cold floors and walls, frozen pipes, ice dams on the roof, excessive heat in the summer, and increasing utility costs.
TruTeam’s expertly trained installers will come to your home to do a free on-site evaluation of your current insulation. We can make recommendations on where and how to add more insulation and then provide professional installation services. While it is often easier to add insulation into open spaces like attics or unfinished basement walls, TruTeam offers drill-and-fill insulation services for closed ceilings and walls.
Federal Tax Credits
Residential Efficiency Tax Credit (25C)
If you increase the energy efficiency of your home, you may be eligible for federal energy efficiency tax credits. These credits have been extended through December 31, 2032. If you add to your home’s insulation before December 31, 2022, you can receive a tax credit of 10% of the material cost up to $500. Starting January 1, 2023, the tax credit has been increased to 30% of the insulation and air sealing material costs up to $1,200. Credit is available on a yearly basis. These energy efficiency tax credits are for existing homes (not new construction or rentals) and only for your primary residence.
Many insulation products qualify for these federal tax credits including batt, blown-in, rigid board, spray foam, and more. Air sealing products like caulk, weather stripping, and house wrap can also qualify if they come with a Manufacturers Certification Statement.
While the tax credit can cover the cost of the materials themselves, it cannot include installation costs. You must have a receipt showing the cost of the insulation. You can claim the credit when you file your tax returns using Form 5695.
Builder New Home Tax Credit (45L)
Builders may be eligible for a Federal Tax Credit of $2,000 for homes completed by December 31, 2022 that were modeled 50% more efficient than the 2006 IECC, with 20% of the efficiency savings from the building envelope. For modeling services, contact TopBuild Home Services.
Starting on January 1, 2023, builders with single family homes that meet ENERGY STAR HOME Version 3.2 Program and meet 2021 IECC prescriptive envelope standards may be eligible for a Federal Tax Credit of $2,500 per home. Builders credit increase to $5,000 for each home meeting DOE Zero Energy Ready Home standard.
Builders constructing multifamily units that meet ENERGY STAR HOME Version 3.2 Program may be eligible for a credit of $500 per unit. For those units meeting prevailing wage requirements, that increases the builders incentive to $2,500. Multifamily units meeting DOE Zero Energy Ready Home standards provide the builder the ability to be eligible for $1,000 per unit credit and those units meeting prevailing wage requirements, that increases the builder incentive to $5,000.
All Builder New Home Tax Credits require a HERS Rating Provider analyze, inspect and test the homes and units. TopBuild Home Services offers these services.
State & Local Tax Credits
In addition to federal tax credits, many states and local utility companies provide rebates for homeowners who improve the energy efficiency of their homes. You can usually receive these rebates in addition to federal tax credits. Check with your utility company – either on their website or by contacting customer service – to see if they offer rebates for adding insulation to your home. You can also check the Database of State Incentives for Renewables & Efficiency at https://www.dsireusa.org.
The experts at your local TruTeam branch may also know about current rebates offered in your area. Keep in mind that these rebates often have expiration dates and are subject to change.
ENERGY STAR Certified Insulation
You may have heard of ENERGY STAR rebates for products like refrigerators, washers, HVAC systems, water heaters, and more. Products that earn the ENERGY STAR label meet energy efficiency standards established by the EPA. While there are no specific ENERGY STAR rebates for the purchase of insulation, there are many different insulation products that carry ENERGY STAR certification. Click here for a list of these products or check with a TruTeam installer to see if your chosen insulation is ENERGY STAR certified.
Tax Credits for Home Builders
Homeowners are not the only ones who can claim tax credits for energy efficient homes. Home builders can claim federal tax credits as well. The Federal Energy Policy Act of 2005 provides for a $2,000 tax credit for new energy efficient homes with 50% energy savings for heating and cooling over the 2006 IECC standards.
These tax credits have been extended several times and currently are set to expire at the end of 2021. More details about certification requirements for builders can be found here, and to claim the tax credit, builders should use IRS Form 8908.
Tax Deductions for Commercial Buildings
The IRS also provides tax deductions for energy-efficient commercial buildings. Owners or designers of commercial buildings with a 50% reduction in energy usage are eligible to claim these deductions. Energy efficiency increases can be achieved through HVAC, lighting, hot water systems, and the building envelope. The tax deduction available is up to $1.80 per square foot, and partial deductions of up to $0.60 per square foot are also possible.
These deductions are available for buildings placed in service after December 31, 2017. There currently is no expiration date for these commercial tax deductions as they were made permanent under the Consolidated Appropriations Act of 2021. More information on these commercial tax deductions can be found here.
Residential & Commercial Insulation Near Me
TruTeam’s nationwide network of local insulation installation contractors guide homeowners, home builders, commercial builders, and renovators through every step of the building process – from selecting energy efficient insulation materials to understanding ENERGY STAR rebates and energy efficient tax credits that may be available.
We keep your projects on budget and on schedule, and we want you to receive as much money back from tax credits and rebates as possible. For more information on residential and commercial insulation near you, contact your local TruTeam branch today.