The Inflation Reduction Act was recently signed into law and includes tax credits and rebates for consumers who buy electric vehicles, install solar panels, and/or make other energy-efficient upgrades to their homes.
Highlights
- Tax credits up to $7,500 for the purchase of a new electric vehicle (EV)
- $4,000 in credits for used electric vehicles
- 30% Tax credit for solar panel installation, saving families $9,000 over the life of the system
- $14,000 in direct consumer rebates for families to buy energy efficient home appliances, including electric heat pumps, electric stoves, and other appliances.
- 10-year extension of the homeowner tax credit for solar projects, energy-efficient water heaters, heat pumps, and HVAC systems, up to 30% of the cost of those upgrades.
Buying an EV and other Clean-Energy swaps
The $7,500 tax credit for purchasing a new EV includes specific requirements tied to the consumer and their new vehicle. These factors include household income and sales price. Additionally, there are other EV-incentives from state and local governments. Click here to read into California’s incentives.
Other incentives include the “nonbusiness energy property credit,” a 30% tax credit worth up to $1,200 a year. The annual cap is $2,000, for heat pumps, heat pump water heaters, and biomass stoves/boilers.
The “residential clean energy credit” also offers a 30% tax credit, and applies to installation of solar panels or other equipment that harness renewable energy (wind, geothermal, and biomass fuel). The HOMES rebate program offers up to $8,000 for consumers who cut their home energy via efficiency upgrades, such as insulation or HVAC installations.
Another incentive is the “high-efficiency electric home rebate program,” which offers up to $14,000 when consumers buy efficient electric appliances. However, this “high-efficiency” program applies only to lower-income households, defined as those earning less than 150% of an area’s median income.
The “Make it in America” provisions expands clean energy tax credits for wind, solar, nuclear, clean hydrogen, clean fuels, and carbon capture.
In summary
This act rewards consumers for lowering their energy costs in a sustainable manner. Consult with your tax advisor to confirm your eligibility.
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