The Inflation Reduction Act is broad in scope, with many areas receiving significant funding for energy efficiency home upgrades and purchasing electric vehicles. Here’s some of the ways home owners can save. We’ll cover the changes to electric vehicles in a subsequent post. These can reduce your tax bill, plus make the world cleaner and more energy efficient.
Energy Efficient Home Improvement Credit
Kiplinger’s notes the following impacts for the 2023 tax year. There will be an annual limit of $1200 for credits and the lifetime limit on energy saving windows goes away. The following are some of the categories and their annual limits.
- $150 for home energy audits
- $250 for an exterior door ($500 total for all exterior doors)
- $600 for exterior windows and skylights; central air conditioners; electric panels and certain related equipment
- $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps. For this one category, the $1,200 annual limit may be exceeded.
The credit is extended through 2032. This provides some long-term stability for manufacturers and purchasers.
Residential Clean Energy Credit
The same article notes the key points for another credit, commonly applied to installing solar panels.
- Credit covers cost to install qualifying systems that use solar, wind, or geothermal to produce electricity, heat water or regulate the temperature in your home
- Credit extended to 2034
- Credit jumps to 30% from 2022 to 2032, up from 26% this year, 23% in 2023, and expiring in 2024.
Alternative Fuel Refueling Property Credit
- For homeowners, the credit is worth 30% of the costs of “qualified alternative fuel vehicle refueling property” installed in the home, up to $1,000.
- Most likely, the alternative fuel vehicle refueling property is equipment used to charge an electric vehicle.
- Intriguingly, the credit applies to the purchase of “bidirectional” charging equipment, which can charge the battery of an electric vehicle and allow you to discharge electricity from the battery back out to the electric grid.
There are more areas where you can save money on tax and do good for the environment. Check out that Kiplinger’s article.