Inflation Reduction Act

The Inflation Reduction Act, signed on August 16, 2022, includes one of the largest climate spending packages in U.S. History. Beginning January 1, 2023, Americans will be able to take advantage of the new and expanded tax credits and rebates below. Please note that this law is new and provisions in the law could change. Please contact your tax professional for any updates to the Inflation Reduction Act.

Residential Clean Energy Credit

• From 1/1/2022 thru 12/31/2032, homeowners can take a 30% credit on the cost of the installation of solar panels or other equipment to harness and store renewable energy including wind, geothermal, biomass fuel.

• The credit is reduced to 26% in 2033 and 22% in 2034.

Energy Efficient Home Improvement Credit

• Beginning 1/1/2023, homeowners meeting certain income requirements can receive a rebate at the point of sale for the following energy efficient improvements

  • $150 for home energy audits

  • $250 for each exterior door (maximum of $500 in credits)

  • $600 for exterior windows and skylights; central air conditioners'; electric panels; natural gas, propane, or oil water heaters; natural gas, propane, or oil, furnaces or hot water boilers

  • $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves and boilers. These item may exceed the $1,200 limit, but all other items must stay within the $1,200 limit

• Any unused credit can be carried forward to offset taxes in future years.

High-Efficiency Electric Home Rebates

• From 1/1/2023 thru 12/31/2032, homeowners can take a 30% credit on energy efficient home improvements up to an annual limit of $1,200 with caps on the following improvements

  • $840 for a stove, range, oven, cooktop, or heat pump clothes dryer

  • $1,750 for a heat pump water heater

  • $8,000 for a heat pump for space heating or cooling

  • $1,600 for insulation, air sealing, and ventilation

  • $2,500 for electric wiring

  • $4,000 for an electric load service center upgrade

• Households making less than 80% of the area’s median income will receive the full credit

• Households making between 80% and 150% of the area’s median income will receive 50% of the credit

• Households making over 150% of the area’s median income will not be eligible for the credits

Electric Vehicle Tax Credit

• Beginning 1/1/2023 through 12/31/2032 purchasers of electric vehicles will receive a credit of $7,500 for new vehicles (less than 2 years old) or $4,000 for older vehicles (over 2 years old).

  • Other clean vehicles could also qualify (hydrogen fuel cell and plug-in hybrids)

  • Tax credit can be taken at the time of purchase or on the tax return

  • Other Qualifications

    • Adjusted Gross Income Qualifications - less than $150,000 for single tax filers, $300,000 for married filing jointly tax filers, and $225,000 for head of households

    • Vehicles must have and MSRP of less than $55,000 or $80,000 for vans, pickup trucks, or SUV

    • Used vehicles must cost less than $25,000

To learn more about these tax credits and see if your upcoming purchases qualify, click Get Started below.