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The Inflation Reduction Act has expanded and extended new energy credits, which will save tax dollars for most Americans. Also, the $500 lifetime cap for energy will be replaced with a $1,200 annual limit. The annual limits for specific types of qualifying improvements will be:
$150 for home energy audits; $250 for any exterior door that meets Energy Star requirements; $600 for exterior windows that meet Energy Star criteria; $600 for central air conditioners, furnaces and water boilers; and $1,200 for heat pumps.
The IRA extends the Clean Vehicle Credit until the end of 2032 and creates new credits for previously-owned clean vehicles. Tax credits include up to $7,500 for the purchase of new qualified clean vehicles and the lesser of 30 percent of the price of used electric vehicles or $4,000.
Beginning in 2023, there is a cap on the manufacturer’s suggested retail price (“MSRP”) of a vehicle to be eligible for this credit. Those caps are $80,000 for SUVs, vans and pickup trucks and $55,000 for other vehicles.
Additionally, there are income limitations for the new vehicle credit based on adjusted gross income (AGI) — for single or married filing separate taxpayers, the limit is $150,000; for taxpayers filing as head of household, the limit is $225,000; and for married filing jointly, the limit is $300,000. There are lesser income thresholds for previously-owned clean vehicles.
The “IRA” will affect the automobile industry and the climate change issues for years to come.
Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or email@example.com.
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