Are you considering some new eco-friendly upgrades to your home? Maybe you want to invest in an electric vehicle or add solar panels to your roof. If so, you may be able to cut expenses with tax credits in the Inflation Reduction Act.
The Inflation Reduction Act has several goals, including addressing climate change through clean energy efforts. This legislation expands and adds several tax credits and rebates to encourage U.S. consumers to invest in green home upgrades and electric vehicles.
Read on to learn about the available energy tax credits for 2023 and beyond outlined in the Inflation Reduction Act and how you may qualify.
$7,500 Tax Credit for New Electric Vehicles
The Inflation Reduction Act extends and improves the tax credit for consumers who purchase new EVs, plug-in hybrids, and hydrogen fuel cell vehicles. This $7,500 credit will now be available through 2032 and apply to vans, SUVs, and pickup trucks under $80,000 and other cars under $55,000.
$4,000 Tax Credit for Used Electric Vehicles
Previously, only consumers who purchased brand-new EVs could enjoy a tax credit. But under the Inflation Reduction Act, consumers who invest in a used electric vehicle can receive a credit of up to $4,000 or 30% of the sales price, whichever is lower.
To qualify for this tax credit, the vehicle price must be under $25,000, and the sale must be the first time the used EV has been sold. Individuals can only claim this credit once every three years.
Related: Learn about the differences between a gas vs. electric car.
Alternative Fuel Refueling Property Credit
If you’re considering purchasing an electric vehicle and want to install a home charging station, now is the time. This credit is worth 30% of the costs associated with charger installations, up to $1,000, and is available through 2032.
Related: Learn more about EVs.
Up to $2,000 a Year for Home Efficiency Projects
Formerly known as the Nonbusiness Energy Property Credit, this tax credit expired at the end of 2021 but has been revived for the 2022 tax year and expanded starting in 2023, thanks to the Inflation Reduction Act.
This credit applies to 10% of the costs of installing energy-efficient home improvements, including windows, doors, roofing, and insulation.
Beginning in 2023, the tax credits will increase to 30% of all eligible eco-friendly home improvements and will cover additional appliances, including electric panels and biomass stoves. The credit will also apply to home energy audits.
Homeowners can space out their green home improvement projects to claim the maximum credit each tax year through 2032. The general limit is $1,200 a year, although a larger $2,000 annual credit applies to some projects.
Related: Learn about renewable energy benefits.
Up to 30% Tax Credit for Clean Energy
Another former credit set to expire in 2024, the 2022 solar tax credit, is now extended through 2034 and applies to the costs of installing all clean energy systems, such as solar, wind, geothermal, biomass, and fuel cell power systems designed to generate electricity.
Previously, the solar tax credit was worth 26% of qualifying installation costs but will now apply to 30% of the expenses until 2032, 26% for the 2033 tax year, and 22% for 2034, after which it will expire.
In addition to installation costs, the federal solar tax credit also applies to battery storage technology, allowing homeowners to store excess energy their systems generate for later use, adding to solar incentives.
Related: Learn more about solar energy benefits and Gexa’s solar energy plans.
Up to $14,000 in Rebates for Energy-Efficient Appliances & Home Upgrades
While not a tax credit, this new rebate created as part of the Inflation Reduction Act can also help families across the country make energy-efficient upgrades.
Rebates will be available to low and moderate-income families who make energy-efficient improvements, such as installing stoves, water heaters, heat pumps, and wiring insulation. To qualify, the annual household income must be less than 150% of the median income in your area.
Available rebates include up to:
- $840 for a stove, range, cooktop, oven, or heat pump clothing dryer
- $1,750 for a water heater heat pump
- $8,000 for a space heating or cooling pump
- $1,600 for insulation, air sealing, and ventilation
- $2,500 for electric wiring
- $4,000 for an electric load service center upgrade
However, there are limits on the rebate amounts that families can receive, and each qualifying household will be limited to no more than $14,000 in total rebates.
The funds for these rebates will be available through September 30, 2031.
The Inflation Reduction Act offers a wide range of opportunities for consumers to benefit financially from going green. Whether you choose to buy an EV, install a solar panel system, or upgrade to energy-efficient appliances, you could qualify for tax credits and rebates to help defray the cost of these investments. Talk to a tax professional about how you can take advantage of these incentives.