The 25C tax credit, introduced as bipartisan policy in 2005 – and expanded in 2022 – provides not only a huge financial benefit for homeowners looking to save on monthly energy costs, but has helped countless contractors that utilize innovative building materials which strengthen a home’s building envelope.
The expanded 25C tax credit under the Inflation Reduction Act (IRA) allows homeowners to receive a 30% tax credit for energy-efficient insulation (up to $1,200 per year) to offset installation costs. A new feature of the tax credit is that it is now available annually. Homeowners can receive $1,200 for updating their basement this year and then another $1,200 for an attic or other upgrade the very next year.
This tax credit not only encourages homeowners to seek out energy-efficient building solutions for their homes, but it also incentivizes manufacturers to innovate and produce energy-efficient building materials and contractors to invest in a well-trained workforce to properly install these materials in homes across the country. Tax credits that promote better building materials is a boon for the homebuilder industry.
Ensuring your home is properly insulated is an often overlooked but critical component to strengthen a home’s building envelope. Among the various types of insulation, spray foam stands out as the premium, all-in-one insulation material on the market. It not only insulates but air seals your home, saving homeowners up to 15% on heating and cooling costs alone. It’s no wonder why experts say that optimizing insulation in a home is the “best way” to “drop your energy bills,” and that the energy savings realized by upgrading to spray foam insulation can pay for itself in as little as 5 to 10 years.
A recent study commissioned by IBE estimates the spray foam industry to be a $2.78 billion dynamic and growing sector of the U.S. economy, employing nearly 55,000 people across all 50 states. Most spray foam operators in the country are independent small businesses and have hired new employees to meet the demands of a emergent industry that has sustained 5 to 10 percent growth from year to year.
Tax credits like 25C should not be seen as a political issue, but rather a boost for homeowners looking to reduce their energy bills and a win for small businesses aiming to meet consumer demand for better building materials and practices.