New Energy Credits for Individuals Under the Inflation Reduction Act
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On August 16, 2022, the Inflation Reduction Act was signed into law. The new bill contains climate change measures and tax incentives to encourage Americans to reduce their carbon footprint. Depending on the purchase and purchase amount, it may qualify for up to $10,000 or more tax breaks and rebates.
Here is a breakdown of some of the new energy tax opportunities available and their requirements.
Electric Vehicles
Consumers may receive tax credits on new and used “clean” vehicle purchases.
New Vehicle Purchase
The bill expands and tweaks the existing tax credit for purchasing “clean” vehicles. Clean vehicles include electric cars, plug-in hybrids, and hydrogen fuel cell vehicles.
Under the new bill, consumers can receive a tax credit of up to $7,500 for purchasing a new “clean” vehicle.
Qualifications
Income Requirements
Income of $150,000 or less for individuals
Income of $300,000 or less for households
Vehicle Price Limitations
$80,000 or less for vans, sport utility vehicles, or pickup trucks
$55,000 or less for all other vehicles
Used Vehicle Purchases
Consumers can receive a tax credit of up to $4,000 or 30% of the sale price of the purchase of a used “clean” vehicle.
Qualifications
Income Requirements
Income of $75,000 or less for individuals
Income of $150,000 or less for households
Vehicle Price Limitations
$25,000 or less for all vehicles
Vehicle Specifications
Vehicle models must be 2 or more years old
Residential Clean Energy Credits
An existing tax credit has been expanded under the Inflation Reduction Act for residential clean energy measures.
Home Improvements
Solar Panels
The expansion provides a 30% rebate from 2022-2032 on solar panel installation and maintenance costs. The rebate amount is planned to be reduced to 26% in 2033 and then reduced again to 22% in 2034.
Windows
The bill also offers a 30% tax credit toward the cost of installing efficient exterior windows, skylights, exterior doors, water heaters, and other items.
And more
Consumers can get rebates on other home upgrades.
$4,000 for an electric load service center upgrade
$1,600 for insulation, air sealing, and ventilation
$2,500 for electric wiring
Qualifications
Energy Cut Percentages
$2,000 rebate (or half the cost of the retrofit project, whichever is less) for an energy reduction of 20% across the whole home
$4,000 rebate for an energy reduction of 35% or more
Income Tax Requirements
Tax credits serve to reduce your tax liability. They aren’t refundable, meaning consumers won’t get a refund if they don’t have a tax liability.
However, if the residential clean energy tax credit is claimed without a tax liability, it can be carried forward to future years to offset future taxes.
Appliances
Consumers may also be eligible for up to $14,000 in rebates on purchases of efficient electric appliances:
Up to $1,750 for a heat pump water heater
$8,000 for a heat pump for space heating or cooling
$840 for an electric stove or an electric heat pump clothes dryer
Qualifications
Income Requirements
Rebate for the total cost of the upgrades, up to $14,000, for those with a household income below 80% of the area median
Rebate of 50% of the cost, up to $14,000, for those with a household income between 80% and 150% of the area median income
Those with a household income above 150% of the area median income are not eligible for rebates
Questions
Have questions about these new energy credits or if you qualify? Our tax experts are here to help. Contact us.