The Inflation Reduction Act

Credit for alternative energy system based on renewable energy source
For example, credit for using solar panels as an energy source for your home got extended to 2034. The improved credit is 30% (26% for 2033 and 22% for 2034) of the costs of your solar panel installation (equipment and installation labor) less any utility company rebates. To qualify for the new tax credit, you must own the solar panels, have a taxable income, and the panels must be installed for your primary or secondary home. This is a non-refundable credit, so in the year you install solar panels make sure you have a tax balance due before the credit. Otherwise, you will lose all or part of your credit. We provide consultations to our clients to determine how they can benefit the most from their energy credit.

Credit for adding energy-efficient improvements to your main home
This credit applies to certain types of insulation and external windows, doors, and skylights. In addition, it covers electric heat pumps and water heaters, some central air conditioning systems and similar energy saving improvements. The credit is 10% of your cost. However, there are a host of caps to limit the amount of credit that can be taken. First, there is the lifetime cap of $500. Then there are smaller caps for specific energy efficient improvements. The credit is enhanced for years 2023 through 2032. The rate increases to 30% and the lifetime limit is moved up to a $1,200 annual limit. We advise that you wait until 2023 to make these kind of energy improvements. Also, make only the $1,200 per year in improvements by spreading them out over multiple years to maximize your credits.

Up to a $150 credit for the cost of a home energy audit
Everyone should get one starting in 2023. This is not a credit for 2022.

Electric Vehicle Tax Credit
The maximum credit is $7,500. MSRP can’t exceed $55,000 for sedans or $80,000 for vans, SUVs, and pickup trucks. Your adjusted gross income must not exceed $300,000 for joint filers, $225,000 for head of household filers and $150,000 for all other filers. There is also a smaller credit (max of $4,000) for purchasing a used electric vehicle that has more stringent (50% less) AGI requirements.