January 19 (Tax Programs)

The government has introduced rebate programs in 2023 to incentivize the electrification of the United States. These programs include the 25c tax credit, the high efficiency electric home rebate (HEEHRA), and the HOMES Act. The HEEHRA provides full or partial cost coverage for low to moderate income households for electrification projects. The HOMES Act offers up to $8,000 for comprehensive energy home improvement projects. It is important to note that individuals cannot participate in both the HEEHRA and HOMES Act programs. The rebates are expected to save American households approximately $1 billion annually. The implementation of these programs is still in progress and varies by state. The goal is to transition to electrification while still allowing for backup gas sources. However, there are challenges in terms of grid capacity and infrastructure. The electrification industry is expected to receive a significant boost from these rebate programs, benefiting contractors and homeowner Today we are going to be going over the rebate programs that the government set out in 2023. One has been going on for over a year now, that's going to be the 25c tax credit, we'll be going over that. We'll also be going over the high efficiency electric home rebate, which is also known as the HEEHRA or the HEEHRP. The other one we're going to be going over is going to be the HOMES Act. The HOMES Act is another low moderate income program to try to electrify the United States. These laws in all were passed by Congress back in 2022 in an omnibus bill to try to electrify the U.S. So there's going to be everything from electric cars to electric stoves, heat pump, clothes dryers, upgrading your panels, weatherizing your home, and installing solar panels. Those are going to be a lot of the options that you're going to have to be able to put on your home. There's a lot of money in these programs that are going to incentivize you and your homeowners and contractors to offer these products. The United States is on a goal to be able to electrify the U.S., so we are going to be using these rebates to kind of jumpstart that. So just to kind of begin, we're going to start with the HEEHRA. This is going to be qualified for low income households, less than 80% of the area median income. You'll get 100% of the purchase and installation cost qualified for electrification projects. It's up to. So moderate income households from 80 to 150% of their area median income will get 50% of the cost. So those are some really good programs. I mean, taking for people who are a median income and giving them, you know, 50% off of the job that they're going to need to do anyway is actually going to be a benefit for the homeowner and for the contractor. So take advantage of these. Make sure that you're offering products that fall into these guidelines. These have not been released by the states yet. So the Inflation Reduction Act included $8.8 billion in rebates, that's 8.8B with a billion, for home energy efficiency electrification projects. So American households are expected to save about a billion dollars annually if the goals from this legislation come to fruition. The legislation is a point of sale discount, so it's actually going to be taken off the top. So the states are still working out how exactly they're going to do that. They're looking at, you know, certificates, ways for us to access a program to maybe go verify if that customer is qualified. But it's something that you're not going to have to pay and then get reimbursed down the road, which is kind of similar to what happens with the 25C tax credit. You have to wait until your taxes are due and you can file it. So if you bought it in January 2nd of 2024, you have to wait until tax season next year to be able to file and get your money back. So it's a long wait. So a lot of homeowners don't want to wait, they don't have the money to wait. So these and other programs, the HOMES and the HEHRA, those programs are really going to help out homeowners who are in a tough spot. Next we're going to talk more about the Homeowner Managing Energy Savings Rebate, which is also known as the HOMES rebate. This is going to allow for up to $8,000 for the program. The Inflation Reduction Act allocated $94 million to your state. So each state got roughly $94 million. Some got, I believe, a little more and some got a little less, depending on their layout and makeup of the state. And they're to undertake comprehensive energy. Home Improvement Projects, that's kind of what they're aiming for. So both of these programs are kind of aiming at the same thing. The one thing that I want to make sure that everybody's aware of is you cannot double dip. You cannot double dip. You cannot do the HEHRA and the HOMES Act. You either qualify for one or you qualify for the other. But you can still do the Form 25C tax credit and qualify for up to $2,000 for an HVAC project and then another, I think, $1,200 for electrification. So that's $3,200 available through the 25C. Those are all great programs. These are rolling out as we speak. So every state is becoming the distributor for these funds. So they're setting up commissions. Most legislative sessions are in process right now in most states. So hopefully, they're able to get this figured out by second quarter of the year of 2024. And we can start rolling this out by summer. Your state's going to be depending on a lot of factors, you know, your legislative movements, your governors, everything, the signing of the bills, making sure everything's clarified. You can go in and read more about this at the IRS website. You know, a lot of this information I extrapolated from multiple sources. I was making, you know, things that didn't make sense, trying to make sense. Because a lot of the IRS information is very cut and dry. You can read into it. You know, it doesn't give you all the information you need. It gives you a good layout. So basically, we are going to be looking forward to these programs hopefully here soon. It's going to be huge for sales. It's going to be huge for business owners. It's going to be huge for the homeowners. Everybody's going to benefit from this. Excuse me, let me get a drink here so I can... Everybody's going to benefit from this in one way, shape, or form. You know, it's something that not many of us want to do. We don't want to get rid of gas and everything. And here's the thing, which is you don't have to get rid of your gas in every scenario. You can keep your gas as a backup, go with the heat pump variable speed, and then you still have that option to go to gas if you need as a backup source. So they're not taking that away from you. Some states are. California is aiming for like 2029 to be natural gas-free, which Washington State, for example, is looking at like 2030 to stop installing gas in commercial buildings, and that might actually be the case already. I know they're not doing much for natural gas in commercial, but I'm pretty sure that the state of Washington and other states are going to be pretty much doing away with gas at some point in time when it comes to new construction. The people who have it will probably be able to keep it for a time being, at least until something replaces it. As we've noticed, electrification of the U.S. is not going to be an easy venture. We've proven that cold weather, various factors, all affect the grid. I recently got...I live in Washington State. I have Puget Sound Energy as my utility company. And during the coldest part of the year here, we had it down to about 10 degrees about a week ago, they sent us out an email stating that if we could conserve energy because they're having a strain on the grid, my response to that is fix your grid, fix everything, get it all. I'm paying ridiculous amounts of money in bills. You keep raising the prices, and I need to conserve energy when it's 10 degrees outside. So this is just not going to work out for everybody. We're going to have to figure something out. There's no way we can go over to all electrification, even close to our current grid. We're going to need literally 50, 100 times what we have power-wise to be able to supply all power and get rid of natural gas. So this is just something that's going to hopefully relieve some stresses for people when it comes to the gas prices going up and the changing economy and the change of the world. And, you know, it's one of those things that we either can get on board with, we can ride the gravy train because this is for a contractor. This is a godsend to you. This is an absolute godsend. I mean, besides just banning gas outright and oil outright, which would be absolutely horrible for consumers, this is the best thing that we could be having for our industry. You know, this is going to infuse, you know, $8.8 billion into the electrification industry, whether that be HVAC plumbing, certain plumbing like heat pump water heaters, and then electrification like solar panels and things of that nature. So this is going to be a huge infusion in the economy for business owners that are on the fringe. If you can hopefully get online, get your ducks in a row and get these programs to be second nature to you, you're going to be competing with other people, but there's going to be a lot to go around. You know, I've always said there's plenty of work to go around for everybody. We should all just play nice. You know, I don't think that anybody's going to get, you know, the short of the stick as long as you're following the program requirements and you're actually doing good quality work. I mean, if you're not doing good quality work, you shouldn't be in business in the first place, and hopefully you go out of business because you're bringing the rest of the industry down. You know, if you're not doing 100% and pretending like it's your house and you're out there just slopping in stuff, you know, hopefully you do fail. I really do hope you fail. You figure it out and you turn around and you do what you're supposed to do, which is take care of the homeowner, be a good customer service. So we kind of segued into, from the rebates, into, you know, being honest and being a good contractor. So I'm going to go ahead and kind of dig into a little bit more of like philosophy around business and around HVAC. This industry has a really bad name. We tend to get the, you know, they're just salespeople. They're trying to sell me something. You know, and there is a lot of those out there. You know, there's a lot of companies out there that are trying to sell you something, but there's also a lot of companies out there that want to do it right. They want to do it efficiently, but they still need to make a profit and they still need to come ahead. And there's a fine line between too much and not enough and just right. It's like the three bears, you know, eat no meal. One's too cold, one's perfect, one's too hot. And, you know, that's why people say get three bits, is you get three bits to find that good, better, best scenario. You find the person you like, the person you believe is going to do the best job, and you go with them. Unfortunately, a lot of times homeowners will choose the cheapest one, even though that might not be the guy they like the most. You know, people do purchase from people they like, but if you're $3,000 more than the guy below you, they're going to lower their standards a little bit, unfortunately. And that's going to happen more often than it should. Your house's worth or homeowners' or customers' houses are worth, on average, where I live, Washington, Seattle area, $500,000 or more for an entry-level home. So single-story rambler, nothing fancy, no custom build, no mansion. This is a 1,400-square-foot house, okay? You spend $500,000 on a house, but you want to spend $3,000 on a furnace. It makes no sense to me. You want to spend $500 on a water heater. These are just things that I don't understand. I don't understand why you would want to take your biggest asset and invest poorly into it. The one thing I take pride in is my home. Not everybody can be a homeowner. I'm blessed. I'm blessed, especially in this economy. I'm blessed as the age that I'm at to be able to own a home, when a lot of people my age do not have the resources or the ability to purchase a home. For people to discard their home in the sense of using lower-end materials or hiring shoddy contractors, a lot of times you're going to pay for that twice. A lot of times you're going to pay to do it once, and then you're going to pay somebody more to do it a second time to fix it. So the big thing is relaying your quality. So if you're not out there showing customers your quality, if you don't have pictures of your installs, and not your best installs. Those are all we should be ready to go. But your one-off installs, your installs that you did the best you could because you had to use what you had. It was a tight space. Let customers know, this is what we do. We take care of you. We make sure that the job's done correctly. That's going to come along with being able to be knowledgeable about the rebates, knowledgeable about the products that you're offering, and honest. If those things come together, then you're going to be successful. Those are just hands-down success stories. I really enjoy being in this industry. I really like watching people and how businesses work and how different comfort advisors, project managers do their job. You know, there's no real one way to do the work. You're out there doing what you think is best for your company. You need to have some set goals. Make sure that you're putting a certain amount into marketing, into future growth. And as long as you're doing that, you know, success is right around the corner. And using these programs, the HOMES Act, the H-E-E-H-R-A or H-E-E-H-R-P, the 25C tax credit, these are all ways for you to be able to increase your sales by double. Because you should be selling your... When these projects come out, when these rebates come in, you should be selling high-end equipment. You should be selling your variable speed modulating systems at literally half the price of what you probably were selling them for. So if you're selling a system, and I'm using this example as a full system, let's use a carrier green speed with a modulating furnace and everything. You know, you're spending $20,000 right now. That's what a homeowner would pay, 20 grand to install that. At least here in Washington, that's about what it would be. If they're moderate to low income, that could be honestly $14,000, $15,000 that's going to be covered by the H-E-E-H-R-A or H-E-E-H-R-P. That's huge. That makes that system, you know, $4,000 to $6,000 versus $20,000. If you can't sell that to a homeowner, that they're getting the best quality system for 75% off, then you probably weren't really meant to either be in sales or project management, or you just aren't applying yourself enough, or you're not providing the quality and the professionalism that they want. Those are the only reasons I can think of, because if you're offering high quality products, high quality service with a high quality warranty, with a high quality installation, 75% off, you should be literally getting checks at the door almost at that point. So, that's one thing that you need to really take advantage of, you know, get pictures lined up, have an album built in your phone, print out if you're old school, print them out. Have them ready for homeowners to see what you offer quality wise. They want to see it, they want to know about it. I know there's a lot of ways to find out now, Google, Facebook, Yelp, all the other review websites, but nothing's better than you sitting there showing exactly why this install was done the way it was. Why you did PVC venting off the side of the house versus the roof. These are all things homeowners will appreciate when you go to do the job. They're going to be clear on what they're getting, they're going to be clear on what their expectations are, and you won't have any issues hopefully. We're always going to have that one customer that's just impossible to deal with. But on average, 90% of the time, you're going to be free and clear, you're going to have a happy customer because you set expectations and you created something that was meant for their house. In Washington, as I keep saying Washington because I'm here, not many houses are the same. Unless you go into a track built home, you're literally going to have a completely different layout, floor plan, everything from neighbor to neighbor. Most Seattle, I don't think there's really other than track houses and condos, there's not a house that's built the same next to each other, so you're dealing with different floor plans, so everything is customizable here. If you're offering solutions, then that's what homeowners really want. The price is going to come, because the price is going to be what they want and how much you need to make a profit to be able to cover your expenses. But with these programs, your success rate should go through. If you're not tracking last year to this year or before these programs come out to after, you're doing yourself a disservice because you need to track and see how much money is about to come from these programs. It's going to make a lot of people millionaires. It's really going to spread far and wide, so hopefully everybody gets a little piece of their pie. This is going to be a quick 20 minute episode today, I'm going to go ahead and get this out so you guys have it. I'm going to go ahead and start another one here shortly, it's going to be a little bit longer, a little bit more broader topics. We kind of went into somewhat of a tangent today in regards to sales, project management stuff. The big goal was to get in and talk about the programs. What I'm going to do is I'm going to kind of round this out with some qualifying conditions for the HEEHRA, so the High Efficiency Electric Home Rebate Act. Low income households, like I said, 80% are going to get about 100% of it. 80-150% of the area median income is going to get 50%. The maximum allowable rebates are going to be $8,000 for a water heater, for a heat pump or air conditioner. Heat pumps both heat and cool your house, so it's going to be benefit for all scenarios, pretty much all the way around the United States. You can get a heat pump, water heater, and you can get up to $1,750 in this rebate for that. That should cover a significant portion of the cost, it's probably not going to cover the full thing, but hopefully about half. The other thing is going to be switching to electric stoves, range ovens. You're going to get up to $840 for those, there's some requirements you have to meet, they have to be Energy Star, really. So two types of stoves, let's see, traditional electric resistance and modern induction. Transferred fuel to cooking pan, yeah, so it's just basically $840 for an electric induction stove. Heat pump, clothes dryer, yep, they do have those, so just a heat pump, clothes dryer sounds like what it is, it's going to have a vent that goes outside and dissipates the heat. So upgrade your electric panel, this is where another big one is, this is up to $4,000 for that. Then we're going to, that's going to be upgrade your panel, stab locks, and scoes. The next thing is going to be weatherization, so to weatherize your home you're going to get up to $1,600 for air sealing, ventilation, insulation, things like that. Then we're going to go over real fast the homeowner managing energy savings rebate, which is the homes, and that's up to $8,000. There's some different requirements on income and whatnot for this one, eligibility. The energy saving incentive tiers are going to be the retrofit with modeled energy savings of about 35% or more. It's either $4,000 or 50% of the project cost, whatever's greater, or whatever's less. So I believe you can go up to $4,000, so if your project's $8,000 you can get $4,000, at least that's the way the IRS is reading. Retrofits with a modeled energy saving of 20% to 34%, 2,000 or 50% of the project cost, and with 15% or more in savings only, you get $100 or 50%, so if it's a $200 job you get $100. Not really the best when it comes to the lower efficiency, so this is really going to drive people to the high efficiency equipment. There's going to be one other tax credit I want to really quickly go over, and that's the residential clean energy tax credit, that's the 25D. That's going to be rooftop solar, it's going to be underneath that. It's supposed to be uncapped at 30% for a tax credit, so we'll see. Uncapped is an interesting verbiage. It depends on factors such as your home, size, where you live. Solar is one of those things, if that's on your list, this is a really good incentive for you, so 30% uncapped, so if you do $30,000 you get about roughly $10,000 rebate, roughly, I mean it's 33%, so a little bit of a math equation there. That's really going to be the amount of credit you can take as a percentage of the total improvement expenses in the year of your installation, with no annual, maximum, or lifetime limit. If you do it before 2032, it's 30%, if you do it after 2032, it's 26%, if you do it for 2034, it's 20%, so it keeps dropping down year to year to year to year, it's kind of an incentive to do it sooner than later. So yeah, this is kind of a quick little rundown, I'm happy to go over it more, I'll still be tapping into these in future episodes, we'll go ahead and talk more, and if I have people on for interviews, we will definitely have more conversation in regards to this. So, check out your brands, Mitsubishi, Electric Carrier, Coleman, a lot of those brands are all going to have websites dedicated to what equipment qualifies, what doesn't, they're all being re-rated right now from HSPF, SEER, to HSPF2 and SEER2, so if they haven't been re-rated, they're being re-rated currently. Take advantage of this, everybody, this is something huge, this is a big deal, it's going to make a lot of people very wealthy, but it's also going to make a lot of homeowners very happy, so it's always a double-edged sword, if it wins both ways, that's usually a good scenario. So, anyways, I'm going to be signing off, we will be talking again soon, I appreciate you tuning into the Callback Podcast, again, I'm your host, Jason Bergstrom, I'm out of Washington State, I have been doing this for 15 plus years in the HVAC industry, I've done sales of over $3 million a year on more than one occasion, I pride myself in quality, respect, and being honest, so please feel free to reach out to us at thecallbackatgmail.com, thecallbackatgmail.com, we do go ahead and we do respond to anything that you have, so please give us an email, ask us questions, and we will be happy to answer them, so have a wonderful day, stay warm, take care.