3 Clean Energy and Vehicle Tax Credits

March 8, 2024
Federal tax credits for energy-efficient home improvements and clean vehicles make going green even more attractive.

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"):
  • 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

Check vehicle eligibility.

  • 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.)

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Supporting documentation for any claims or statistical information is available upon request.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

0324-3W7X