As Americans face mounting costs at every turn, the recently passed Cut Inflation Act of 2022 aims to provide some relief. Much of this relief comes in the form of energy tax credits, granted when you purchase certain environmentally friendly products. But which products offer kickbacks and how much can you get? Here’s what you need to know.
What is the 2022 energy tax credit?
The 2022 IRA offers American households a variety of tax credits for going green. “Customers who buy eco-friendly cars and appliances or take other steps to reduce their carbon footprint can take advantage of tax credits and rebates,” says Martin Carreon, real estate broker and owner of SoCo. Wine Country Properties. “Through financial incentives, some consumers may qualify for $10,000 or more.”
What are the tax credits in the Inflation Reduction Act of 2022?
There are four main ways to get IRA energy tax credits: you can buy Energy Star appliances, make energy efficiency upgrades to your home, buy renewable home energy systems and buy an electric vehicle. Here is an overview of each.
Save up to $1,250 on energy efficient appliances
If you are looking to buy new energy-efficient appliances, you can get tax credits on the following products:
- Energy Star air source heat pumps: $300 tax credit
- Energy Star Central Air Conditioners: $300 tax credit
- Energy Star Gas Boilers: tax credit of $150
- Energy Star gas, propane and oil heaters and fans: $150 tax credit
- Energy Star non-solar water heaters (gas or electric): $300 tax credit
- Advanced main circulation fan: $50 tax credit for fans that use no more than 2% of your furnace’s total energy.
Save up to $1,500 on energy-efficient home upgrades
You can also get up to $1,500 in tax credits if you invest in the following weatherization projects:
- Insulation: Obtain a tax credit of 10% of your eligible insulation purchases, up to a maximum of $500. Qualifying purchases include batts, rolls, rigid boards, expanding spray, blown fibers, weatherstripping, boxed spray foam, wrapping paper and caulking.
- Windows, doors and skylights: Get a tax credit of 10% of the amount you spend on Energy Star certified windows, doors and skylights, up to $500.
- Rooftops: Get a tax credit of 10% of the amount you spend on an energy-efficient roof, up to $500. Roofing should be Energy Star certified metal or asphalt with the appropriate pigmented coatings or cooling granules.
When calculating these tax credits, installation costs cannot be included.
Save 30% on renewable home energy systems
You can get tax credits equivalent to 30% of the cost of the following renewable energy systems if they are installed between 2022 and 2032.
- Geothermal heat pumps
- small wind turbines
- Solar water heaters
- Solar panels
- Fuel tanks
- Biofuel stoves
“This credit was previously 26% and is expected to decline to 22% in 2023 before expiring in 2024,” said Sam Jammal, vice president and chief of staff at solar finance firm Mosaic. Now, the 30% savings will continue through 2032. Also, unlike the home improvement credit, installation costs can be included in the calculation of this credit.
Save up to $7,500 on an electric vehicle
If you plan to purchase an electric vehicle in the near future, a tax credit of up to $4,000 is available on used electric vehicles, while up to $7,500 is available for new vehicles electrical. A big advantage of this credit? You don’t have to wait for tax time to reap the benefits. “The credit for new and used electric vehicles is transferable at the car dealership and can be applied at the point of sale,” says Jammal.
However, this tax credit comes with a lot of fine print. For example, when purchasing a used electric vehicle, sole filers must have a modified adjusted gross income of less than $75,000, while joint filers must have a MAGI of less than $150,000. Additionally, the vehicle cannot be more than two years old and must have a purchase price of less than $25,000.
For new vehicles, the manufacturer’s suggested retail price must be $55,000 or less for sedans and $80,000 or less for vans, SUVs and trucks. Also, to qualify, your MAGI cannot exceed $150,000 if you are a single filer or $300,000 if you are filing jointly. You can find out more on the US Department of Energy website.
Going green can bring in well over $10,000 in tax credits
If you are planning to go green on a small or large scale, now is a good time to do so and save some money. “Many consumers may feel like large items like electric vehicles, solar panels and energy storage are the only way to take advantage of the tax breaks under the IRA,” says Greg Fasullo, CEO of Elevation Home Energy Solutions. “It’s important that they look for smaller tasks, including efficiency upgrades. These are not only eligible for savings and rebates, but can also reduce a home’s carbon footprint and lead to future savings on utility bills and home maintenance.
#Consumers #Save #Climate #Tax #Breaks