The Inflation Reduction Act was signed into law on August 16, 2022. Below are some of the provisions related to energy efficient tax credits that you may be able to take advantage of.
Energy Efficient Home Improvements
1. Residential Energy Efficient Property Credit (Solar Panel Credit) The credit jumps from 26% to 30% and is available for the years 2022-2032. The credit falls to 26% in 2033 and 22% in 2034. Credit expires after 2034.
2. Nonbusiness Energy Property Credit
· For 2022, taxpayers could claim 10% of the costs of installing energy-efficient insulation, windows, door, and roofing for the use of energy saving. Lifetime limit of $500 for the credit
· For 2023-2024, the credit jumps to 30% of costs and includes biomass stoves and boilers, electric panels. Lifetime limit increases from $500 to $1,200
Electric Vehicle Tax Credit Expansion
· The act extends the up to $7,500 EV credit until December 2032. This applies to any clean vehicle (examples are hydrogen fueled cars, plug-in hybrids)
· Sedans must be priced no more than 55,000 and SUVs and Truck 80,000 to qualify for the credit. Make sure to do the research that the credit is available for the make/model you are purchasing.
· Starting in 2024, you can use the EV credit as a discount towards the purchase of your vehicle, instead of claiming it on your tax return.
· The cap of 200,000 vehicles manufactured is removed. The car needs to be made in North America to qualify for credit
· To qualify income needs to be below: 150,000 for single, 225,000 for Head of Household and 300,000 for MFJ. All or nothing credit. If a client has made a down payment before the act was passed, they can qualify for the old EV tax credit
· EVs previously owned at least two years old will have a separate credit of up to $4,000 or 30% of the price of the vehicle, whichever is less. However, it does not qualify if it’s purchased for resale. Your income needs to be below: 75,000 for single filers, 112,500 for Head of Household, and 150,000 for Married Filing Joint
For more information, contact us at Zak.S@CapitalTax.com or 925-977-7784.