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Tax credits are highly sought after because they provide a dollar-for-dollar reduction in your tax bill. This is unlike tax deductions, which only give you pennies on the dollar spent as a deduction.
On August 16, 2022, the President signed the Inflation Reduction Act, which opened up important tax credits for homeowners. It includes three tax credits that encourage homeowners to make energy-efficient changes and promote the use of electric vehicles.
Energy Efficient Home Improvement Credit
The 2023 Energy Efficient Home Improvement Credit encourages homeowners to make energy-efficient changes, such as installing energy-efficient windows and doors, adding home insulation, and installing energy-efficient HVAC systems.
The new law allows a $1,200 annual cap for energy-efficient changes. There are some individual caps on certain improvements, but you should be able to take advantage of different changes annually.
Residential Clean Energy Credit
The easiest way to use the Residential Clean Energy Credit is to install solar panels. Fortunately, the latest law increased the credit from 26% to 30% for eligible properties placed in service from 2022 to 2032.
This credit has no caps, and since the average solar installation is $20,000, you could save as much as $6,000.
This credit also applies to other purchases, such as solar water heaters and residential fuel cells.
Home Electric Vehicle Charger Credit
You may get a tax credit through 2032 if you install a home electric charger. The credit is equal to 30% of the charger’s cost, with a maximum of $1,000. However, starting this year, the credit is only available to residents of low-income or rural areas.
If you have questions about these credits and how they affect you, contact us today!
