landlord vs homeowner for Inflation Reduction Act clean energy benefits

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landlord vs homeowner for Inflation Reduction Act clean energy benefits

Post by SUP »

Hi all,
I've learned a bit about the clean energy credits in the 2022 IRA from this thread:


My question is whether I should try to do energy efficiency upgrades to a house now, while I am a landlord and rent it out, or later, when I am retired and live in the house.

Details of my situation:
  • Live and work in California, single.
    Work in So Cal, renting, plan to retire around end of 2026 (but various factors could move this up or back by 1-2 years).
    Own a home in Central CA, currently rented out, plan to retire there (but not 100% certain, and might spend first couple of years of retirement travelling or living abroad).
The house is all-gas, and I would like to go all-in on renewable and electrification: double-pane windows, solar with storage (will require electrical panel upgrade), mini-split heat pump, electric appliances, electric water heater. And get an electric vehicle (which might be tied into the battery/storage system) and EV charging. This will be expensive. The water heater is new, but the gas furnace is over 40 years old. It works well, for now, and doesn't leak--but it really should be replaced. And some of the windows are ready to be replaced--it would be nice to take care of all of them at once, soon.

What should be my strategy for upgrading this house? I have a high salary as well as investment income, and we can assume for all of the income test phase-outs that I earn too much. On first glance it seems I should wait until the January after I retire to start these improvements to get maximum credits/rebates. However, there are also incentives for landlords, and I haven't even begun to figure out how this works--seems aimed at owners of multi-unit buildings. Recall there could be 1-2 years when I am a landlord but am retired, with much lower income, in case that's a situation that gives me an advantage. But a wrinkle to that is that if things go incredibly well I will have stock options (ISOs) that could be worth a fair bit at time of retirement, and I would be managing that situation as well. I am aware that net metering rules change soon---but it's not possible to install solar now for various reasons, so that's off the table. (I also personally believe the rules will be changed again.)

My tentative plan, unless you all steer me in a different direction:
Replace the windows soon, hoping to get a landlord's tax break
Replace the gas furnace soon with a mini-split heat pump ($8-14K estimate last year), again hoping to get landlord's tax break
Wait until I retire to do other work (solar, electrical work to enable electric appliances and EV charging)

What should I do?
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