Authored by Torie Soriano, Digital Campaigner
The Federal Government is paying you to go green. As of January 1st, 2023, thousands of dollars in tax credits are now available from the largest climate bill in U.S. history, the Inflation Reduction Act (IRA), for sustainable residential and transportation upgrades. By switching to electric and investing in energy-efficient improvements, you can reduce your utility costs, decrease the amount of toxic pollution in your home, and qualify for a range of tax incentives. Start planning home upgrades now to maximize the money you save and the money you’ll get back on Tax Day.
Some of these benefits are familiar but have changed with new requirements to qualify under the new law. Here’s a breakdown of the updated tax credits standards and amounts on clean energy and efficiency upgrades under IRA:
Home & Appliance Upgrades
Are you interested in upgrading your windows, doors, insulation, or other appliances? By investing in energy-efficient improvements and upgrades to weatherize your home, you could significantly reduce energy bills and qualify for tax incentives.
The previous program, the Nonbusiness Energy Property Credit, awarded only 10% of the cost for home improvements with a maximum lifetime limit (to be claimed once) of $200 for windows and $500 for everything else. Home upgrades completed in 2022 will still fall under this credit limit for 2022 taxes.
As of January, the Nonbusiness Energy Property Credit is now the Energy Efficient Home Improvement Credit under the IRA. Each household can claim 30% of the cost of a home energy audit and home upgrades to exterior doors and other fixtures, heating and cooling appliances, electric panels, and heat pumps. The new program has increased the tax credits, and instead of a lifetime limit, it now has an annual limit. Therefore you can plan out your upgrades over the next ten years to maximize the available money you can claim each year.
One household under the Energy Efficiency Home Improvement Credit can claim up to $1,200 in home audits and home upgrades and up to $2,000 on heat pumps for a maximum of $3,200 annually. All homes that serve as the primary residence are eligible; the only condition to qualify is that this credit will only lower the federal taxes owed and can only be refunded if you owe money.
Residential Clean Energy
Are you looking into solar or other renewable energy sources for your property? Gain energy independence and a significant amount of money back on tax day by implementing clean energy into your household.
The Residential Clean Energy Credit amount has increased under IRA from 26% to 30% of the cost with no maximum limit on your renewable energy projects. This increase was added automatically, so all eligible clean energy projects implemented last year will qualify for the new rate on your 2022 taxes. Eligible residential clean energy projects include solar panels, roofing/shingles, storage batteries, wind turbines, and geothermal heat pumps. Only primary resident households can claim this credit on projects completed by an approved installation contractor.
Click here for more information on the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit.
New/Used Clean Vehicles
Is EV in your future? Purchasing a new (and used in 2023) clean vehicle can help eliminate the financial burden of increasing gas prices and unlock some tax credits.
Following the IRA announcement on August 16, 2022, the Clean Vehicle Tax Credit has new requirements enacted immediately. The qualifications and the amount you may receive will depend on when you completed the purchase of the electric vehicle.
If you purchased a new clean vehicle BEFORE August 17, 2022 you can claim up to $7,500 (starts at $2,917, plus $417 for each additional kWh above 5 kWh). There are no further requirements to apply this tax credit to your 2022 taxes. The only condition to be aware of are manufacturer’s limitations: companies cannot offer the tax incentive if they manufactured over 200,000 plug-in electric vehicles. Check to see if your company has exceeded their manufacture’s limitations.
If you purchased a NEW clean vehicle AFTER August 17, 2022, there are now requirements to qualify for this tax incentive. To be considered a qualified vehicle, their final assembly must be in North America and be made by an approved manufacturer. Qualified vehicles must also be under a set Manufacturer's Suggested Retail Price (MSRP) value, and vehicle owners must be under certain income limits to claim this credit. The maximum you can still claim for an electric vehicle is $7,500. Here’s more information on the new clean vehicle standards.
If you purchased a USED clean vehicle this year, you may be eligible to claim up to 30% of the sales price with a maximum of $4,000 in tax credits on your 2023 taxes. The used vehicles must come from a dealer and cost less than $25,000, must be no more than two years old, and vehicle owners must be under certain income limits to qualify. Here’s more information on the used clean vehicle standards.
Click here to learn more about the available tax credits from the Inflation Reduction Act.
If you still need to complete your energy-efficiency upgrades and purchases, there is time to do so, as most of these credits will remain available until 2032.
The Federal Government plans to release additional credits, rebates, and deductions from the Inflation Reduction Act throughout the year, so sign up to receive clean energy updates from the White House to continue saving money and the environment.