Tax Credits for Energy and Vehicle Improvements

What you need to know

Are you looking to make your home more energy-efficient or considering purchasing an electric vehicle? If so, you might qualify for valuable tax credits! Here’s a breakdown of the Energy Efficient Home Improvement Credit, the Residential Clean Energy Credit, and the Clean Vehicle Credit.

Energy Efficient Home Improvement Credit

First and foremost, if you make qualified energy-efficient improvements to your home, you may qualify for a tax credit of up to $3,200. Specifically, this credit equals 30% of your qualified expenses. However, there are some annual limitations to keep in mind:

  1. Combined Credit: The total credit for all energy-efficient home improvements is limited to $1,200 per year, except for certain items.
  2. Specific Limits:
    • $600 per year: For central air conditioners, natural gas, propane, or oil water heaters, furnaces, hot water boilers, improvements or replacements of panelboards, subpanelboards, branch circuits, or feeders, windows, and skylights.
    • $250 per door: For exterior doors, with a total limit of $500 for all doors.
    • $1,200 per year: For insulation and air sealing materials or systems.
    • $150 per year: For home energy audits.
    • $2,000 per year: For heat pumps, heat pump water heaters, biomass stoves, and boilers.

Additionally, labor costs for installing these items do not qualify for the credit. Plus, these credits only apply to your primary residence, and any excess credit cannot be applied to future tax years.

Residential Clean Energy Credit

Next, if you invest in renewable energy for your home, you may qualify for an annual residential clean energy tax credit. Qualified expenses include:

  • Solar electric panels
  • Solar water heaters
  • Wind turbines
  • Geothermal heat pumps
  • Fuel cells
  • Battery storage technology (with a capacity of at least 3 kilowatt hours)

This credit equals 30% of the cost of new, qualified clean energy property installed in your home. However, the credit for fuel cell property is limited to $500 for each half kilowatt of capacity. Unlike some other credits, any excess can be carried forward to future tax years.

Clean Vehicle Credit

Finally, if you buy a new qualified plug-in electric vehicle (EV) or fuel cell electric vehicle (FCV), you might receive a substantial credit. Here are the key details:

  • Income Limits: Your modified adjusted gross income (AGI) must not exceed $300,000 for married filing jointly (MFJ) or a qualifying surviving spouse (QSS), $225,000 for head of household (HOH), or $150,000 for single or married filing separately (MFS). You can use your modified AGI from either the year you take delivery of the vehicle or the year before.
  • Qualified Vehicles: Must have a battery capacity of at least 7 kilowatt hours, weigh less than 14,000 pounds, be made by a qualified manufacturer, undergo final assembly in North America, and meet specific mineral and battery component requirements. Moreover, the MSRP cannot exceed $80,000 for vans, SUVs, and pickups, or $55,000 for other vehicles.
  • Credit Amount: $3,750 if the vehicle meets only the critical minerals requirement or battery components requirement, or $7,500 if it meets both.
  • Assignment of Credit: You can assign the credit to the dealer as a partial payment or down payment. However, if you do not qualify based on your AGI, you will have to repay the credit when you file your tax return for the year.

To find out which vehicles qualify, visit fueleconomy.gov.

Previously-Owned Clean Vehicle Credit

If you’re considering a used EV or FCV, you might also qualify for a credit. Here are the essentials:

  • Income Limits: Must not exceed $150,000 for MFJ or QSS, $112,500 for HOH, or $75,000 for single or MFS.
  • Qualified Vehicles: Must have a sale price of $25,000 or less, be at least two years old, not previously transferred after August 16, 2022, weigh less than 14,000 pounds, and be primarily used in the U.S. The vehicle must be bought from a dealer, who will report the required information to you and the IRS.
  • Credit Amount: 30% of the sale price up to a maximum credit of $4,000.
  • Assignment of Credit: Similar to new vehicles, you can assign the credit to the dealer, with the same repayment conditions if you don’t qualify based on your AGI.

To check eligible vehicles, visit fueleconomy.gov.

Or for more information:

Conclusion

In conclusion, these tax credits offer significant savings if you make energy-efficient improvements or invest in clean energy and vehicles. However, it’s crucial to be aware of the specific requirements and limitations. For personalized advice and planning, always consult a tax professional. Happy saving!

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