The recently passed Inflation Reduction Act includes several initiatives that provide tax breaks and rebates for households that take steps to improve their energy efficiency. Consumers who make energy efficient home upgrades and purchases may qualify for up to $10,000 or more in these benefits, in addition to other benefits such as lower electricity bills and a smaller carbon footprint.
Tax Credits for Homeowners
Homeowners could get up to a 30% tax credit for installing solar panels or other renewable energy equipment, such as windmills. Costs incurred in installation from 2022 through 2032 qualify for a 30% tax credit. The credit falls in later years, dropping to 26% in 2033 and 22% in 2034. This extends a previous tax credit set to expire in 2023 and, starting in 2023, includes battery storage technology so homeowners can pair solar panels with storage.
Other home efficiency projects, such as energy-efficient windows and water heaters, also qualify for a 30% tax credit toward installation costs. The cap on these savings is $1,200 a year, though some projects can qualify for higher caps. The installations must meet certain efficiency criteria to qualify, and some specific items have individual caps. The credit also covers the cost of a home energy audit (up to $150) and an electrical panel upgrade (up to $600).
There are no income limits for these credits, but the credits are not refundable in the event a consumer does not have tax liability. The credits do carry over.
There are also rebate programs for efficiency upgrades to their homes, based on a percentage of energy usage cut. Lower-income households qualify for higher rebates. In addition, home appliances can qualify for a separate program, though the same project cannot apply to both rebate programs. State governments have to apply for grants, and the limits will vary by state.
Tax Credits for Electric Vehicles
Individuals and families who buy new energy-efficient vehicles such as electric cars, hybrids, and hydrogen fuel cell vehicles qualify for a tax credit worth up to $7,500. This credit is available through 2032. However, these tax credits only apply to those with under $300,000 joint adjusted gross income or $150,000 individual adjusted gross income. In addition, even if your income level qualifies, purchase prices are capped. If your passenger car is purchased for more than $55,000, you will not qualify. The limit for vans, SUVs, and pickup trucks is $80,000.
However, do not expect the full extent of these benefits soon. Auto companies in the United States have to adapt to supply new vehicles that will qualify for this initiative. Used versions of clean vehicles, however, qualify for the lesser of $4,000 or 30% of the sales price. The income limits are lower for this tax credit: $150,000 for married couples or $75,00 for individuals, and the sales price cannot exceed $25,000.
Colorado Estate Planning Attorney
For help figuring out how these initiatives impact your estate planning goals, contact the Boulder estate planning attorneys at the Braverman Law Group. To schedule a free, no-obligation consultation with one of our trusted attorneys, give us a call today at (303) 800-1588.