How Consumers Can Save Over $10,000 With the New Climate Tax Breaks

Source: money.usnews.com

As Americans face rising costs at every turn, the recently passed Inflation Reduction Act of 2022 aims to provide some relief. A big part of that relief comes in the form of energy tax credits – given when you buy certain eco-friendly products. But which products offer kickbacks and how much can you get? Here’s what you need to know.

What Is the Energy Tax Credit 2022?

The IRA of 2022 offers American households a variety of tax credits for going green. “Customers who purchase eco-friendly cars and appliances or take other measures to lessen their carbon footprint can take advantage of tax credits and rebates,” says Martin Carreon, a real estate broker and owner of SoCo Wine Country Properties. “Through financial incentives, some consumers may qualify for $10,000, or even more.”

What Tax Credits Are in the Inflation Reduction Act of 2022?

There are four main ways to earn the IRA’s energy tax credits: You can buy Energy Star appliances, make energy-efficient home improvements, buy renewable home energy systems and buy an electric vehicle. Here’s a closer look at each.

Save Up to $1,250 on Energy-Efficient Appliances

If you’re looking to buy new energy-efficient appliances, you can get tax credits on the following products:

Energy Star air source heat pumps: $300 tax credit
Energy Star central air conditioning units: $300 tax credit
Energy Star gas-powered boilers: $150 tax credit
Energy Star gas, propane and oil furnaces and fans: $150 tax credit
Energy Star non-solar water heaters (gas or electric): $300 tax credit
Advanced main circulating fan: $50 tax credit for fans that don't use more than 2% of your furnace's total energy.

Save Up to $1,500 on Energy-Efficient Home Improvements

You can also get up to $1,500 in tax credits if you invest in the following weatherization projects:

Insulation: Get a tax credit for 10% of your qualifying insulation purchases, up to $500. Qualifying purchases include batts, rolls, rigid boards, expanding spray, blow-in fibers, weather stripping, spray foam in a can, house wrap and caulk.
Windows, doors and skylights: Get a tax credit for 10% of the amount you spend on Energy Star-certified windows, doors and skylights, up to $500.
Roofs: Get a tax credit for 10% of the amount you spend on an energy-efficient roof, up to $500. Roofing must be Energy Star-certified metal or asphalt with the appropriate pigment coatings or cooling granules.

When calculating these tax credits, installation costs can’t be included.

Save 30% on Renewable Home Energy Systems

You can get tax credits equal to 30% of the cost of the following renewable home energy systems if they are installed between 2022 and 2032.

Geothermal heat pumps
Small wind turbines
Solar water heaters
Solar panels
Fuel cells
Biomass fuel stoves

“This credit was previously at 26% and scheduled to step down to 22% in 2023 before expiring in 2024,” says Sam Jammal, vice president and chief of staff at solar financing company Mosaic. Now, the 30% savings will continue through 2032. Additionally, unlike the home improvement credit, installation costs can be included when calculating this credit.

Save Up to $7,500 on an Electric Vehicle

If you’re looking to buy an electric vehicle in the near future, a tax credit of up to $4,000 is available on pre-owned EVs while up to $7,500 is available for new EVs. A big perk of this credit? You don’t have to wait until tax time to reap the benefits. “The credit for new and used EVs is transferable to the auto dealer and may be applied at the point of sale,” says Jammal.

On the downside, this tax credit comes with a lot of fine print. For example, when buying a used EV, single filers must have a modified adjusted gross income below $75,000 while joint filers must have an MAGI below $150,000. Additionally, the vehicle can’t be more than two years old and must have a purchase price below $25,000.

As for new vehicles, the manufacturer's suggested retail price must be $55,000 or below for sedans and $80,000 or less for vans, SUVs and trucks. Additionally, to qualify, your MAGI can’t exceed $150,000 if you’re a single filer or $300,000 if you're filing jointly. You can learn more on the U.S. Department of Energy website.

Going Green Can Pay Well Over $10,000 in Tax Credits

If you’ve been considering going green on a big or small scale, now is a good time to do it and save some money. “Many consumers may be under the impression that big ticket items like EVs, solar panels and energy storage are the only way to cash in on tax breaks under the IRA,” says Greg Fasullo, CEO of Elevation Home Energy Solutions. “It’s important that they research smaller tasks, including efficiency upgrades. These are not only eligible for savings and rebates, but can lower the home’s carbon footprint and lead to future savings on utility bills and home maintenance.”

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Source: money.usnews.com