The Inflation Reduction Act of 2022 focuses on incentives for clean energy investments, including tax credits for consumers. The legislation includes emissions standards, tax incentives and grants with the goal of reducing carbon emissions by 40% by 2030.
But what’s in it for you? Tax credits for solar panels, battery storage, electric vehicles and electric appliances.
Tax Credits for Solar Panels & Battery Storage
Solar installers have long pointed to the Solar Investment Tax Credit (ITC) as a way to partially fund your investment in solar panels for your home.
The old ITC program looked like this:
- 30% tax credit for equipment placed in service between 2017 and 2019
- 26% tax credit for equipment placed in service between 2020 and 2022
- 22% tax credit for equipment placed in service in 2023
Under The Inflation Reduction Act, the Solar Investment Tax Credit looks like this:
- 30% tax credit for equipment placed in service between 2022 and 2032
- 26% tax credit for equipment placed in service in 2033
- 22% tax credit for equipment places in service in 2024
The 30% tax credit applies to any solar panel installation after January 1, 2022, so if you already installed your solar panels, you’ll get back more than you thought!
In addition to applying to solar panels, you can get the same credit for a battery storage system.
That credit is available for retrofits of a battery to an existing solar panel system, or installing it with your new system.
A battery storage system lets you store solar power and use it at night or on rainy days, rather than using power from the grid.
And, depending on the solar buyback plan you have, you’ll have even more power to sell back to the grid when wholesale prices spike.
You can incorporate this new tax credit into your calculation when you purchase solar panels.
And you can calculate how much you can make selling solar back to the grid in Texas with a solar buyback electricity plan.
Tax Incentives for Purchase of Electric Vehicle
Have your eye on a new or used electric vehicle (EV)? The Inflation Reduction Act will help you pay for your car purchase.
You can get up to $7,500 toward the purchase of a new EV or up to $4000 toward the purchase of a used EV.
The amount is credited at the time of purchase, not as a tax credit. And the amount varies based on the total purchase price.
Previous EV purchase tax credits excluded manufacturers that had sold over 200,000 vehicles. That left out vehicles from companies like Tesla, General Motors and Toyota. Not anymore.
The new EV purchase credit is available regardless of manufacturer.
To qualify for the EV purchase tax incentive, you must be within income guidelines:
- Purchase of a new EV: To qualify for the purchase credit, you must have an adjusted gross income of under $300,000 for joint returns, $225,000 for head of household tax returns and $150,000 for all other tax returns.
- Purchase of a used EV: To qualify for the purchase credit, you must have an adjusted gross income of under $150,000 for joint returns, $112,500 for head of household tax returns and $75,000 for all other tax returns.
There’s also a limit on the cost of the vehicle to qualify for the credit:
- Electric cars must be $55,000 or less
- Electric SUVs, Electric Trucks and Electric Vans must be $80,000 or less.
You better believe that vehicle manufacturers are going to do what it takes to offer cars at those price points.
Tax Credits for Electric Appliances
You can earn up to $14,000 in credits for upgrades to your home completed between January 1 2022 and September 30, 2031.
Available credits include:
$8,000 for a heat pump, which can cool your home in the summer and heat it in the winter
- $8,000 for a heat pump, which can cool your home in the summer and heat it in the winter
- $1,750 for a high-efficiency, all-electric heat pump water heater
- $840 for an electric induction cooktop
- $840 for a high-efficiency all-electric heat pump clothes dryer
- Up to $9,100 for improvements to the electric panel, wiring, and home insulation
To qualify for these electrification rebates, you must earn under 150% of the median income in your area.
For example, a household with a household income of $136,200 or less in Houston Texas or $143,400 or less in Dallas, Texas can qualify.
Consult your tax professional to find out what tax credits and tax incentives you may qualify for.