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Weatherization and new windows are big money and energy savers. Jasmin Merdan via Getty Images

Energy efficiency can save homeowners and renters hundreds of dollars a year, and the new Inflation Reduction Act includes a wealth of home improvement rebates and tax incentives to help Americans secure those saving.

It extends tax credits for installing energy-efficient windows, doors, insulation, water heaters, furnaces, air conditioners or heat pumps, as well as for home energy audits. It also offers rebates for low- and moderate-income households’ efficiency improvements, up to US$14,000 per home.

Together, these incentives aim to cut energy costs for consumers who use them by $500 to $1,000 per year and reduce the nation’s climate-warming greenhouse gas emissions.

With so many options, what are the most cost-effective moves homeowners and renters can make?

My lab at UMass Lowell works on ways to improve sustainability in buildings and homes by finding cost-effective design solutions to decrease their energy demand and carbon footprint. There are two key ways to cut energy use: energy-efficient upgrades and behavior change. Each has clear winners.

The biggest payoff for both saving money and reducing emissions is weatherizing the home to stop leaks. Losing cool air in summer and warm air in winter means heating and cooling systems run more, and they’re among the most energy-intensive systems in a home.

Gaps along the baseboard where the wall meets the floor and at windows, doors, pipes, fireplace dampers and electrical outlets are all prime spots for drafts. Fixing those leaks can cut a home’s entire energy use by about 6%, on average, by our estimates. And it’s cheap, since those fixes mostly involve caulk and weather stripping.

Common places where homes leak – and where weatherization measures can save money. Department of Energy

The Inflation Reduction Act offers homeowners a hand. It includes a $150 rebate to help pay for a home energy audit that can locate leaks.

While a professional audit can help, it isn’t essential – the Department of Energy website offers guidance for doing your own inspection.

Once you find the leaks, the act includes 30% tax credits with a maximum of $1,200 a year for basic weatherization work, plus rebates up to $1,600 for low- and moderate-income homeowners earning less than 150% of the local median.

Replacing windows is more expensive upfront but can save a lot of money on energy costs. Leaky windows and doors are responsible for 25% to 30% of residential heating and cooling costs, according to Department of Energy estimates.

Insulation can also reduce energy loss. But with the exception of older homes with poor insulation and homes facing extreme temperatures, it generally doesn’t have as high of a payoff in whole-house energy savings as weatherization or window replacement.

The Inflation Reduction Act includes up to $600 to help pay for window replacement and $250 to replace an exterior door.

Upgrade appliances, especially HVAC and dryers

Buildings cumulatively are responsible for about 40% of U.S. energy consumption and associated greenhouse gas emissions, and a significant share of that is in homes. Heating is typically the main energy use.

Among appliances, upgrading air conditioners and clothes dryers results in the largest environmental and cost benefits; however, HVAC systems – heating, ventilation and air conditioning – come with some of the highest upfront costs.

That includes energy-efficient electric heat pumps, which both heat and cool a home. The Inflation Reduction Act offers a 30% tax credit up to $2,000 available to anyone who purchases and installs a heat pump, in addition to rebates of up to $8,000 for low- and moderate-income households earning less than 150% of the local median income. Some high-efficiency wood-burning stoves also qualify.

The act also provides rebates for low- and moderate-income households for electric stoves of up to $840, heat-pump water heaters of up to $1,750 and heat-pump clothes dryers of up to $840.

Change your behavior in a few easy steps

You can also make a pretty big difference without federal incentives by changing your habits. My dad was energy-efficient before it was hip. His “hobby” was to turn off the lights. This action itself has been among the most cost-saving behavioral changes.

Just turning out the lights for an hour a day can save a home up to $65 per year. Replacing old lightbulbs with LED lighting also cuts energy use. They’re more expensive, but they save money on energy costs.

We found that a homeowner could save $265 per year and reduce emissions even more by adopting a few behavioral changes including unplugging appliances not being used, line-drying clothes, lowering the water heater temperature, setting the thermostat 1 degree warmer at night in summer or 1 degree cooler in winter, turning off lights for an hour a day, and going tech-free for an hour a day.

Some appliances are energy vampires – they draw electricity when plugged in even if you’re not using them. One study in Northern California found that plugged-in devices, such as TVs, cable boxes, computers and smart appliances, that weren’t being used were responsible for as much as 23% of electricity consumption in homes.

Start with a passive solar home

If you’re looking for a home to rent or buy, or even to build, you can make an even bigger difference by looking at how it’s built and powered.

Passive solar homes take advantage of local climate and site conditions, such as having lots of south-facing windows to capture solar energy during cool months to reduce home energy use as much as possible. Then they meet the remaining energy demand with on-site solar energy.

Studies show that for homeowners in cold climates, building a passive design home could cut their energy cost by 14% compared with an average home. That’s before taking solar panels into account.

The Inflation Reduction Act offers a 30% tax credit for rooftop solar and geothermal heating, plus accompanying battery storage, as well as incentives for community solar – larger solar systems owned by several homeowners. It also includes a $5,000 tax credit for developers to build homes to the Energy Department’s Zero Energy Ready Homes standard.

The entire energy and climate package – including incentives for utility-scale renewable energy, carbon capture and electric vehicles – could have a big impact for homeowners’ energy costs and the climate. According to several estimates, it has the potential to reduce U.S. carbon emissions by about 40% by the end of this decade.

Jasmina Burek does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

What’s in Democrats’ big bill? Climate, health care, deficit reduction

The biggest investment ever in the U.S. to fight climate change. A hard-fought cap on out-of-pocket prescription drug costs for Medicare recipients. A new corporate minimum tax to ensure big businesses pay their share.

And billions left over to pay down federal deficits.

All told, the Democrats’ “Inflation Reduction Act” may not do much to immediately tame inflationary price hikes. But the package that won final congressional approval in the House on Friday and heading to the White House for President Joe Biden’s signature will touch countless American lives with longtime party proposals.

Not as robust as Biden’s initial ideas to rebuild America’s public infrastructure and family support systems, the compromise of health care, climate change and deficit-reduction strategies is also a stunning election year turnaround, a smaller but not unsubstantial product brought back to political life after having collapsed last year.

Democrats alone support the package, with all Republicans voting against it Friday. Republicans deride the 730-page bill as big government overreach and point particular criticism at its $80 billion investment in the IRS to hire new employees and go after tax scofflaws.

Voters will be left to sort it out in the November elections, when control of Congress will be decided.

Here’s what’s in the estimated $740 billion package — made up of $440 billion in new spending and $300 billion toward easing deficits..

AP Photo/Patrick Semansky, File

Launching a long-sought goal, the bill would allow the Medicare program to negotiate some prescription drug prices with pharmaceutical companies, saving the federal government some $288 billion over the 10-year budget window.

The result is expected to lower costs for older adults on medications, including a $2,000 out-of-pocket cap for older adults buying prescriptions from pharmacies.

The revenue raised would also be used to provide free vaccinations for seniors, who now are among the few not guaranteed free access, according to a summary document.

Seniors would also have insulin prices capped at $35 a month.

The bill would extend the subsidies provided during the COVID-19 pandemic to help some Americans who buy health insurance on their own.

Under earlier pandemic relief, the extra help was set to expire this year. But the bill would allow the assistance to keep going for three more years, lowering insurance premiums for some 13 million people who are purchasing their own health care policies through the Affordable Care Act.

The bill would infuse nearly $375 billion over the decade in climate change-fighting strategies that Democrats believe could put the country on a path to cut greenhouse gas emissions 40% by 2030, and “would represent the single biggest climate investment in U.S. history, by far.”

For consumers, that means tax rebates to buy electric vehicles — $4,000 for used vehicle purchase and up to $7,500 for new ones, eligible to households with incomes of $300,000 or less for couples, or single people with income of $150,000 or less.

Not all electric vehicles will fully qualify for the tax credits, thanks to requirements that component parts be manufactured and assembled in the U.S. And pricier cars costing more than $55,000 and SUVs and trucks priced above $80,000 are excluded.

There’s also tax breaks for consumers to go green. One is a 10-year consumer tax credit for renewable energy investments in wind and solar.

For businesses, the bill has $60 billion for a clean energy manufacturing tax credit and $30 billion for a production tax credit for wind and solar, seen as ways to boost and support the industries that can help curb the country’s dependence on fossil fuels.

The bill also gives tax credits for nuclear power and carbon capture technology that oil companies such as Exxon Mobil have invested millions of dollars to advance.

The bill would impose a new fee on excess methane emissions from oil and gas drilling while giving fossil fuel companies access to more leases on federal lands and waters.

A late addition pushed by Sen. Kyrsten Sinema, D-Ariz., and other Democrats in Arizona, Nevada and Colorado would designate $4 billion to combat a mega-drought in the West, including conservation efforts in the Colorado River Basin, which nearly 40 million Americans rely on for drinking water.

One of the biggest revenue-raisers in the bill is a new 15% minimum tax on corporations that earn more than $1 billion in annual profits.

It’s a way to clamp down on some 200 U.S. companies that avoid paying the standard 21% corporate tax rate, including some that end up paying no taxes at all.

The new corporate minimum tax would kick in after the 2022 tax year and raise more than $258 billion over the decade.

There will also be a new 1% excise tax imposed on stock buybacks, raising some $74 billion over the decade.

Savings from allowing Medicare’s negotiations with the drug companies is expected to bring in $288 billion over 10 years, according to the non-partisan Congressional Budget Office.

The bill sticks with Biden’s original pledge not to raise taxes on families or businesses making less than $400,000 a year.

Yet money is also raised by boosting the IRS to go after tax cheats. The bill proposes an $80 billion investment in taxpayer services, enforcement and modernization, which is projected to raise $203 billion in new revenue — a net gain of $124 billion over the decade.

With some $740 billion in new revenue and around $440 billion in new investments, the bill promises to put the difference of about $300 billion toward deficit reduction.

Federal deficits spiked during the COVID-19 pandemic when federal spending soared and tax revenues fell as the nation’s economy churned through shutdowns, closed offices and other massive changes.

The nation has seen deficits rise and fall in recent years. But overall federal budgeting is on an unsustainable path, according to the Congressional Budget Office, which recently put out a new report on long-term projections.

The package, nowhere near the sweeping Build Back Better program Biden once envisioned, remains a sizable undertaking and, along with COVID-19 relief and the GOP 2017 tax cuts, is among the more substantial bills from Congress in years.

While Congress did pass and Biden signed into law a $1 trillion bipartisan infrastructure bill for highways, broadband and other investments that was part of the White House’s initial vision, the Democrats’ other big priorities have slipped away.

Gone, for now, are are plans for free pre-kindergarten and community college, as well as the nation’s first paid family leave program that would have provided up to $4,000 a month for births, deaths and other pivotal needs. Also allowed to expire is the enhanced child care credit that was providing $300 a month during the pandemic.

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