Making Housing Affordable through Tax Credits for Green Energy

Housing costs in the US today are worse than ever and keep climbing. Not only does the price of residential real estate remain high after the pandemic, but mounting interest rates have also made mortgages less affordable. 

For these reasons, up to 26 million buyers found themselves priced out of the US housing market in 2022. Meanwhile, those who already own must find ways to cope with skyrocketing assessments, which translate into proportional property taxes.

At a time like this, what are aspiring and current homeowners to do? Justin Draplin, founder of housing technology company ECLIPSE Cottages, has the answer. 

“The Inflation Reduction Act includes a lot of exciting opportunities for homeowners,” he says. “By incorporating green technologies in a tiny house, you can get tax credits that drive down the cost of owning or purchasing a home.”

What are tax credits?

Tax credits are incentives the government gives taxpayers to motivate them to do certain things. Essentially, the government is willing to pay for part of the costs involved, so it offers subsidies that kick in during tax season, reducing the tax burden you’re required to pay.

To encourage Americans to upgrade their homes with energy-efficient and renewable energy technologies, the US government is now offering tax credits that help offset the expenses of implementing solar and other sustainable energy solutions. These tax credits can be used for the renewable energy equipment itself, as well as for the labor costs involved in installing it.

“The government has started giving millions of dollars away every year to support responsible choices and green living,” Draplin says. “The Residential Clean Energy Credit can be expected to continue for decades into the future, and as a result of it, homeowners can expect big savings.”

The Residential Clean Energy Credit

The Residential Clean Energy Credit provides funds to help households transition to solar, wind, or geothermal power. This tax credit can help defray the cost of fuel cells, batteries for energy storage, solar panels, solar water heaters, wind turbines, and geothermal heat pumps. 

For the next nine years — until 2032 — homeowners can write off 30 percent of the total cost of these improvements on their taxes. In 2033, they will be able to write off 26 percent, and 22 percent in 2034. There’s no maximum cap on the amount homeowners can claim.

However, the equipment must be new, and it must meet the government’s specifications to qualify. Additionally, you can only claim the credit on your primary residence — you actually have to live at the property you upgrade to green energy. It doesn’t matter if you rent or own the home, however, as both renters and homeowners can take advantage of this tax credit.

Sustainable housing you can afford

If you think incorporating green technology would constitute an additional cost on top of a home you already can’t afford, think again.

“At ECLIPSE Cottages, we build solar right into our tiny homes,” Draplin says. “Every one of our cottages has a fortified solar roof that can produce 5.2 kilowatts of energy, which is a ton of power. These roofs are also made out of steel and can survive extreme weather conditions.”

This means home energy tax credits can help you defray the cost of purchasing one of ECLIPSE Cottages’ attractive tiny homes, which are much less expensive than traditional houses. According to The Motley Fool, the average price of a home in the US today is over $430,000. By comparison, the national average for a tiny home is only $45,000.

“Some people can build a new tiny home just with the money they saved for a down payment,” Draplin says. “At ECLIPSE Cottages, we also offer payment plans that can cost as little as $99 a month.”

Tiny homes are also much less expensive to maintain than conventional houses. A common rule of thumb is to budget one to four percent of your home’s value for maintenance each year. From the average prices listed above, that equates to $4,300 for the traditional house but only $450 for the tiny home. By purchasing a tiny home, you can dramatically reduce your housing expenses, and thanks to the tax credit for solar, you can now save even more.

Sustainable housing you can afford

“Many people all across the country are getting frustrated with the conventional real-estate industry,” Draplin says. “That’s why more and more people are becoming willing to consider alternatives like tiny homes.”

Indeed, surveys show that 86 percent of Americans would consider living in a tiny home. The popularity of this movement extends across generations — two out of five owners of tiny homes are over 50 years old.

“Our tiny homes are a solution for people who want to reduce housing costs, but they’re also a solution for the planet,” Draplin says. “Now that these government tax credits are available, owning a tiny home is cheaper than ever.”

For sustainability and affordability, nothing beats an ECLIPSE Cottage.