For some people, the desire to reduce their carbon footprint is reason enough to purchase an electric vehicle or make energy-efficient home improvements. But federal tax credits—which reduce the taxes you owe dollar for dollar—can make these changes even more attractive.
"Even if the tax credits aren't your motivation, it's always a good idea to consult a tax advisor to help ensure you capture any benefits available to you," says Hayden Adams, CPA, CFP®, director of tax and wealth management at the Schwab Center for Financial Research.
Here's a look at three tax credits and how to potentially qualify for each.
(For state tax credits and deductions, check the Database of State Incentives for Renewables & Efficiency® using your ZIP code.)
1. Clean vehicle credits
- Annual tax credit: up to $7,500, if all eligibility requirements are met (see "Qualifications"):
- For vehicles acquired between January 1 and April 17, 2023:
- Base credit: $2,500
- Additional credit: $417 for vehicles with a battery capacity at least 7 kilowatt hours, plus $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours, up to an additional $5,000
- For vehicles acquired after April 18, 2023:
- Meets battery components requirement: $3,750
- Meets critical minerals requirement: $3,750
- Meets both requirements: $7,500
- For vehicles acquired between January 1 and April 17, 2023:
- Qualifications:
- Vehicle must have undergone final assembly in North America
- Applies to the purchase of new vehicles
- Manufacturer's suggested retail price (MSRP) cannot exceed:
- $80,000 for pickup trucks, sport utility vehicles, and vans
- $55,000 for all other vehicles
- Your modified adjusted gross income (MAGI) cannot exceed:
- $300,000 for married couples filing jointly and surviving spouses
- $225,000 for heads of household
- $150,000 for everyone else
- Expires: January 1, 2033
2. Energy-efficient home improvement credit
- Annual tax credit: 30% of qualified improvements, up to $3,200
- Qualifications: existing homes only
- Expires: January 1, 2033
Includes:
- Doors: limited to $250 per door, $500 in total
- Windows: limited to $600 in total
- Heat pumps and biomass boilers and stoves: limited to $2,000 in total
- Home energy audit: limited to $150 in total
3. Residential clean energy credit
- Annual tax credit: up to 30% of qualified improvements with no maximum (Limit will decline to 26% in 2033 and 22% in 2034. Credit cannot exceed taxes owed, but you can carry forward the excess amount for use in future tax years.)
- Qualifications: primary residence, whether owned or rented, and second home if not used as rental; properties must be in the U.S.
- Expires: December 31, 2034
Includes:
- Solar water heaters
- Solar electric panels
- Wind turbines
- Battery storage technology
- Geothermal heat pumps
- Fuel cells (primary residence only) (Credit is limited to $500 per each half-kilowatt of capacity or up to $1,667 per half-kilowatt for multiperson households.)
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