Have you made any energy efficient improvements to your home or business? You may be able to claim valuable tax credits.
Credits for INDIVIDUALS
Energy Efficient Home Improvement Credit (formerly known as the Nonbusiness Energy Property Credit)
Beginning in 2023, the Energy Efficient Home Improvement Credit replaced the previous $500 lifetime credit cap with a new aggregate annual limit of $1,200. Taxpayers may take a credit of up to 30% of the cost of qualified energy efficiency improvements. As an added bonus, qualified heat pumps and biomass stoves/boilers have a separate aggregate annual limit of $2,000. The maximum total credit may be as high as $3,200. The annual limit for exterior window improvements is $600. The annual limit for improvements to exterior doors is $500.
While the credit for qualified building envelope components (doors, windows, insulation) is only available to the home owned and used as the principal residence, the credit for energy property expenditures (water heaters, air conditioners, heat pumps, biomass stoves/boilers) can be claimed on a secondary home or rental property.
The Energy Efficient Home Improvement Credit is a nonrefundable credit without carryover.
Residential Clean Energy Credit (formerly known as the Residential Energy Efficient Property Credit, aka the Solar Credit):
This credit amounts to 30% of the cost of eligible expenditures on a home that is owned or rented through the end of 2032. After 2032, the credit phases down to 26% in 2033 and 22% in 2034. Qualified residential clean energy expenditures include solar panels, solar water heaters, fuel cell property, small wind energy property, geothermal heat pumps, and battery storage (new in 2023).
The Residential Clean Energy Credit is a nonrefundable credit with an indefinite carryover.
Clean Vehicle Credit (formerly known as the Qualified Plug-In Electric Drive Motor Vehicle Credit):
A taxpayer may claim a maximum of $7,500 for the Clean Vehicle Credit. To qualify, there are some restrictions to be aware of:
- Income Restrictions: The tax credit phases out for higher-income taxpayers. Specifically, no credit is available for taxpayers with adjusted gross incomes (AGI) exceeding $300,000 for married couples filing jointly, $225,000 for heads of household, or $150,000 for all other filers.
- Battery Capacity and Vehicle Weight: The electric vehicle must have a battery capacity of at least 7 kilowatt hours and weigh less than 14,000 pounds.
- Price Limits: There are price caps depending on the type of vehicle. The manufacturer’s suggested retail price (MSRP) cannot exceed $80,000 for vans, SUVs, and pickup trucks, or $55,000 for other vehicles such as sedans.
- Manufacturing and Assembly: The vehicle must be manufactured by a qualified manufacturer and undergo final assembly in North America.
Determine whether your vehicle is manufactured by a qualified manufacturer and assembled in North America by clicking on the links below:
Manufacturers and Models for New Qualified Clean Vehicles Purchased in 2023 or After
Electric Vehicles with Final Assembly in North America
The Clean Vehicle credit is nonrefundable and cannot be carried over.
Used Clean Vehicle Credit:
A new credit of up to $4,000 is also available for the purchase of a previously owned clean vehicle, subject to income limitations, through 2032. To qualify for this credit, you must be an individual, the car must be purchased from a licensed dealer, and you cannot have claimed this credit in the 3 years before the purchase date. In addition, your modified adjusted gross income (AGI) may not exceed$150,000 for married filing jointly, $112,500 for heads of households, $75,000 for all other filers.
The vehicle must meet all of these requirements:
- Have a sale price of $25,000 or less. Sale price includes all dealer-imposed costs or fees not required by law. It doesn’t include costs or fees required by law, such as taxes or title and registration fees.
- Have a model year at least 2 years earlier than the calendar year when purchased. For example, a vehicle purchased in 2023 would need a model year of 2021 or older.
- Not have already been transferred after August 16, 2022 to a qualified buyer.
- Have a gross vehicle weight of less than 14,000 pounds
- Be an eligible FCV or plug-in EV with a battery capacity of least 7 kilowatt hours
- Be for use primarily in the United States
The Used Clean Vehicle credit is nonrefundable and cannot be carried over.
Credits for BUSINESSES
Commercial Clean Vehicle Credit
This credit is available through 2033 for qualified electric vehicles bought and used in a trade or business. The credit is equal to the lesser of 15% of the vehicle’s basis (30% if the vehicle is not powered by a gasoline or diesel internal combustion engine) OR the excess of the vehicle’s purchase price over the cost of a comparable vehicle in terms of size and use up to a maximum credit of $40,000.
Advanced Energy Project Credit
The IRS has extended the Section 48 Energy Credit to property under construction before January 1, 2025. Qualified property has been expanded to include energy storage technology, qualified biogas property, microgrid controllers, and interconnection property.
Going Green?
We encourage our clients to reach out if they feel they may benefit from these credits. Realize is available to help you make the best of your options in the best interests of the planet.
Realize Your Business Goals
Every business, from start-ups to seasoned operations, needs a proactive trusted advisor working for its best interest. Whether your business is technology, venture capital or real estate, Realize can ensure your accounting and tax compliance needs are met. We provide your company with meaningful business advice and make certain you are taking advantage of the tax saving opportunities available to you.