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Skyrocketing electric bills are an unhappy sight for any homeowner — but if the root cause isn’t strictly increased energy usage, the culprit might be something even closer to home than you think.
In fact, higher-than-expected monthly electric bills, along with flickering lights and frequently tripped circuit breakers, can be a telltale sign that there’s a problem with your residential electrical panel (also known as a “panelboard,” “sub panelboard,” or “breaker box”), but since the topic isn’t exactly top of mind for most homeowners, questions abound: How much does installation cost, and how long does it take? What are the risks of not taking action? What kind of benefits can I expect from my investment?
You’ll find answers to these questions and more in the below guide. You’ll also find that, thanks to expanded tax credits for home electrification projects like electrical panel upgrades included in the Inflation Reduction Act (IRA) of 2022, there are a host of compelling reasons to take action sooner rather than later — to the point where homeowners whose electrical systems, while outdated, aren’t necessarily causing problems yet, could be incentivized to upgrade as well.
Here’s everything you need to know about residential electrical panel upgrades — costs, risks, timelines, watch-outs, benefits, and more — in the context of robust IRA incentives.
Flickering lights and frequently tripped circuit breakers can be a nuisance — and sure, those are problems any homeowner would be happy to see fixed. But the real upside (and ROI) of investing in an electrical panel upgrade goes way beyond convenience. When it comes to home performance, the benefits of upgrading your residential electrical panel include:
Optimizing your home’s energy efficiency
Substantially bolstering your home’s overall safety — roughly 10% of all residential fires originate in home electrical systems, after all, and outdated electrical systems, which are prone to overloading and overheating, can exacerbate the risk
Reducing the risk of fire damage to your home, which can cost more than $20,000 to remedy
Preventing damage to your home’s appliances, which can result from the fluctuating power levels associated with outdated residential electrical systems
If captured alongside other home performance improvements in a home certification, an electrical panel upgrade may help boost home’s resale value
The bottom line is, making do with an outdated residential electrical panel means taking on some serious safety and cost risks.
Like most things involving electrical work — but unfortunately unlike the way electricity itself works — getting a read on costs can be something of a high-resistance path. Load requirements vary from one household to the next, for example, plus it’s a safe bet that between, say, Texas and Calirfonia, labor costs associated with installation probably don’t net out exactly the same for homeowners every single time.
Be that as it may, here’s a rough outline of what you can expect from a cost perspective:
Most residential electrical panels on the market today range from 60 to 400 amps. In general, higher-amperage panels — anything in the 400 range — are only required for exceptionally large or luxury homes, and unsurprisingly, these panels are also more expensive. However, your home’s specific amperage requirements shouldn’t have any bearing on the labor costs associated with installation.
Estimates vary widely, in part for some of the reasons mentioned above. But having surveyed many sources, most homeowners will be looking at a sticker price, including installation, in the ballpark of $1,300 to $1,600. Again, note that this estimate is independent of the cost-saving opportunities included in the IRA.
If an electrician tells you that your electrical panel is outdated and needs to be replaced, it usually makes the most financial sense to upgrade at the same time. With labor costs the same either way, it’s usually only an additional $50 or $100 to go all-in and upgrade, and you’ll save more money over the long run with an upgrade than you would with a one-to-one replacement.
Of course, looking at costs in the abstract, without considering the impact of IRA incentives, doesn’t give you the whole picture. So let’s break down in detail how these rebates and tax credits can help substantially reduce the financial burden of residential electrical panel upgrades for homeowners.
The IRA’s home electrification incentives for homeowners come in two basic forms: rebates and tax credits. What’s the difference?
Rebates get applied at the point of sale. You’ll pay less when you purchase the product, in other words, based on the terms of the rebate you’re eligible for.
Tax credits, on the other hand, don’t come into play until tax season, at which point homeowners can use them to decrease — or even eliminate — their tax liability for a given year.
You can read more about rebates and tax credits associated with the IRA in our comprehensive guide for homeowners.
In the case of residential electrical panel upgrades, however, only tax credits, not rebates, apply. More specifically, the § 25C Residential Energy Efficiency Tax Credit is the one that’s most directly relevant to homeowners interested in residential electrical panel upgrades.
A quick rundown of what § 25C entails for homeowners:
The goal of this tax credit is simple: to incentivize household electrification by lowering the cost of electrification upgrades that improve home performance and increase energy efficiency.
To that end, § 25C is a non-refundable tax credit of up to 30% or $600 worth of cost, which can be used to offset your overall tax liability. Labor costs for installation are covered by that 30% as well.
“Non-refundable” means that the tax credit could potentially reduce the amount you owe to zero, but no further. Note that 30% of the cost of the installation (or $600) is the absolute maximum credit you can receive.
§ 25C is scheduled to continue at its current level (30%) through 2032, subsequently dipping to 26% in 2033 and 22% in 2034 before expiring altogether in 2035.
As for the qualification requirements, here’s where things get a little bit trickier. Namely, to be eligible for the IRA tax credit, your residential electrical panel upgrade must be undertaken in conjunction with the installation of a heat pump or heat pump water heater (HPWH). And just to be completely clear, “in conjunction with” means that your new electrical panel is directly enabling the operation of your heat pump or HPWH. If you’re running these on two separate electrical systems, you’re out of luck.
Additionally, your electrical panel upgrade must be classified as an “improvement to, or replacement of, a panelboard, sub-panelboard, branch circuits, or feeders” — borrowing the language of this handy summary from ENERGY STAR® — that satisfy two final criteria:
It must be installed in a manner consistent with the National Electric Code — which shouldn’t be a problem.
It has to have a load capacity of at least 200 amps — which should be ample power for most residential applications.
Sure, these last two bullet-points come with simple “yes” or “no” answers, but there’s room for a good deal of complexity to enter the equation elsewhere, which is why it’s probably wise for you to check out this relevant IRS Fact Sheet. It contains much more detailed information on § 25C, so while you’re looking at it, you ought to loop in your local tax professional.
Finally, since you’ll need to be able to prove that your electrical panel upgrades were installed in conjunction with another qualified energy efficiency improvement, it’s best to heed the IRS’s recommendation regarding documentation — most notably, that it’s above all your responsibility to “retain documentation sufficient to establish the entitlement to, and amount of, any credit.” So be sure to carefully preserve relevant receipts, invoices, work orders, and similar. Pearl’s free app Green Door can also be helpful, as each year, the app drops documentation about potentially qualifying installations you logged in the app, along with information your tax pro can use to help you get the credit you deserve.
Thinking about upgrading your residential electrical panel? There are undeniably compelling reasons for doing so right now, but your best step is nonetheless to first download Green Door, the free app from Pearl Certification.
Why? Several reasons: For one, its Savings tool will find rebates and tax credits you may be eligible for and provide you with the most up-to-date information about the programs’ rollout in your area. From there, you can use the app to connect with experienced local contractors, ensure the quality of your residential electrical panel upgrade installation, and as mentioned above, access important tax-related documentation your tax pro can use to help you access tax credits. Simply put, it’s the best way to ensure your home performance investments translate to higher resale value down the line.
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