There are tangible ways you can personally benefit now and into the future from the Inflation Reduction Act which became law on August 16th.
The Residential Clean Energy Credit (formerly the Residential Energy Efficient Property Credit) has been extended and enhanced. It now allows a 30% tax credit for the costs of qualifying clean energy systems through 2032. The credit then tapers down over the next two years before expiring at the end of 2034. The most common examples of qualifying systems are solar and wind. In 2023, battery storage technology (that meets capacity requirements) will be added.
The Energy Efficient Home Improvement Credit (formerly the Nonbusiness Energy Property Credit), which previously expired at the end of last year, has been reinstated through 2032. For 2022, credits fall under the previous rules; however, in 2023, the tax credit receives a nice boost. The 10% cost credit becomes 30%, the $500 lifetime limit becomes a $1,200 annual limit, and many of the individual item limits also increase. Notable energy-efficient products include – roofing, windows & doors, insulation, water heaters, air conditioning systems, furnaces, and heat pumps. A $150 tax credit for home energy audits is also added in 2023.
The Clean Vehicle Credit (formerly the Qualified Plug-in Electric Drive Motor Vehicle Credit) has been extended and expanded. The up to $7,500 tax credit will now last through 2032 and apply to any type of new “clean vehicle”; however, it now includes stipulations around pricing, income, and sourcing & assembly (See assembly resources below.). In 2023, a 30% used EV credit, up to $4,000, will be added. Also, beginning in 2024, you will have the option to take the credit as a discount at the time of purchase and no longer have to wait on your tax return to get the benefit. Relatedly, the Alternative Fuel Refueling Property Credit has also been extended through 2032 and provides a 30% tax credit, up to $1,000, for in-home EV charging equipment.
The High-Efficiency Electric Home Rebate Program was created. This income-based program provides rebates for energy-efficient appliances such as ranges, ovens, cooktops, heat pump HVAC systems, and heat pump water heaters. There are also rebates for non-appliance upgrades such as circuit panels, electrical wiring, insulation, and ventilation. In addition to individual limits for each item, there is a total household rebate limit of $14,000.
This is by no means a complete list and there are various caveats for each of the credits/rebates- income limits, specifications, timing, etc. Please check with your CPA or tax preparer to confirm that you qualify, to what extent, and if there are any other credits/rebates from which you may benefit.