The Inflation Act includes major changes to energy-related tax credits for homeowners and auto buyers | Whuff News


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Homeowners and car buyers can expect big changes to energy-related tax credits that are part of the 2022 Tax Cuts Act.

Tax credits for homeowners

The Affordable Care Act revived and modified two energy-related credits for homeowners:

The Non-Industrial Energy Property Debt has been renewed through 2022

Homeowners can claim the Nonbusiness Energy Property Credit to improve the energy efficiency and energy use of their property by 2022. This credit largely expired at the end of 2021, but the Inflationary Depreciation Act took effect again in 2022.

  • Energy efficiency improvements are building envelope elements, such as insulation, some metal roofing, windows and exterior doors.
  • Suitable energy properties include heat pumps, air conditioners, heaters, and biomass stoves.

The homeowner’s total lifetime liability is limited to $500. The annual liability for certain types of property is also limited.

The Electric Home Improvement Credit replaces the Non-Business Energy Property Credit

Beginning in 2023, the Non-Industrial Energy Property Credit is being restructured as the Practical Home Improvement Credit. This credit is equal to 30% of:

  1. The cost of improving the energy efficiency of a household,
  2. Expenditure on residential energy property on eligible energy property, even if the taxpayer does not own a home, and
  3. The cost of a home energy audit.

Credit no longer has a lifetime limit, but limits apply to annual credit and credits for certain types of property.

The eligible costs of a new Home Improvement Loan for Operations and an Old Energy Non-Commercial Property Loan are similar, but not the same.

Residential Clean Energy Credit replaces Residential Energy Efficient Property Credit for TPSO reporting

A minor change applies to the existing Energy Efficient Residential Property Credit, called the “Clean Energy Residential Credit.” The 2022 bill applies to investments in solar, fuel cells, wind power and geothermal heat pumps. After 2022, the credit rate increases, and the credit is added to battery storage technology.

Tax credits for car buyers

The Depreciation Act makes major immediate changes to the existing credit for new electric vehicles. In 2023, the credit is renamed and restructured, and the new credit applies to used electric vehicles.

Plug-in electric vehicles must be integrated in North America

The current Plug-In Electric Vehicle is no longer applicable to a vehicle purchased after August 16, 2022, unless:

  • The final assembly of the vehicle took place in North America, or
  • before August 16, 2022, the taxpayer entered into a binding written agreement to purchase the vehicle.

The Department of Energy has a list of Model Year 2022 and Model Year 2023 electric vehicles that may meet this final assembly requirement. However, since some models are built in many places, taxpayers should use the VIN Decoder website from the National Highway Traffic Safety Administration to determine the place of manufacture of a particular vehicle.

Pure Car Credits replace the Plug-In Electric Car Credit

After 2022, the existing Plug-In Electric Drive Vehicle Credit is updated as the New Vehicle Credit. As with the existing credit for electric vehicles, the maximum New Credit for a Clean Vehicle is $7,500.

However, in many ways, the post-2022 New Clean Vehicle Credit is more restrictive than the credit it replaces.

  1. The New Clean Vehicle Credit does not apply to high-income taxpayers.
  2. The New Clean Vehicle Credit does not apply to high value vehicles.
  3. To get a clean New Vehicle Credit, the vehicle must meet local content and manufacturing requirements.

On the other hand, the new Clean Vehicle Credit feature extends its reach to car buyers who don’t want to wait for a tax credit to reimburse their vehicle costs. Starting in 2024, the car buyer can transfer the credit to the dealer. This allows the seller to use the credit as a price reduction, down payment, or cash discount.

Use of Clean Vehicle Thread available for the first time

In addition to the revised New Clean Vehicle Credit, a brand new credit of up to $4,000 is available to people who purchase clean used vehicles after 2022. Both clean (electric) and fuel cell vehicles are eligible for the Clean Vehicle Credit.

As with the Clean New Vehicle Loan, customers with high incomes and high value vehicles are not eligible for a loan; and, after 2023, the buyer may be able to transfer the credit to the seller.

Another Vehicle Fueling Case has been expanded and corrected

Finally, the Alternative Fuel Vehicle Refueling Property Treaty, which expired at the end of 2021 is being renewed in 2022. However, after 2022, the credit only applies to property in low-income census tracts and non-urban areas. Credit rates and depreciable (business) property limits are also being changed.



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