EV and Home Energy Credits to Claim before Potential Repeal in 2025
The Inflation Reduction Act of 2022 (IRA) was passed with a multitude of goals for the United States, one of them being to incentivize businesses and individuals to participate in the clean energy transition. For individuals specifically, these incentives take the form of tax credits for electric vehicles and clean energy or energy efficient homes. Some components of the Inflation Reduction Act may be repealed under the Trump administration, as Donald Trump has expressed the desire to repeal the Act and rescind any unspent funds allocated for it. Tax credits for EVs, solar panels, and battery storage may be repealed in 2025, so if you’ve thought about claiming a credit for any one of these, the time to do it is before the end of 2024. We’ll discuss each of these credits in more detail.
The Electric Vehicle Credit & Alternative Fuel Refueling Property Credit
These credits help reduce the cost of purchasing an electric vehicle and of EV charging equipment and installation.
Credits for new clean vehicles purchased in 2023 or after: There is a tax credit of up to $7,500 for the purchase of either a new EV, qualified plug-in EV, or fuel cell EV. To ensure eligibility, sellers must provide documentation about the vehicle’s qualifications at the time of sale, and they must register with the IRS online and provide the same information. If the seller fails to do so, the credit will not be available. Eligibility is also subject to income limits.
Credits for qualified vehicles purchased before 2023: These purchases may be eligible for a similar tax credit of up to $7,500. For vehicles purchased in 2022, Form 8936 can be used to claim the credit. To claim a credit on a vehicle purchased before 2022, file an amended tax return for the tax year in which you took possession of the vehicle.
Used clean vehicles purchased in 2023 or after: The IRA offers a tax credit for 30% of the sale price of a qualified used vehicle, up to a maximum of $4,000. This credit applies to vehicles purchased from a licensed dealer and priced under $25,000. Eligibility is subject to income limits.
EV Charging Equipment: In addition to vehicle credits, the IRA also provides tax credits for cost and installation of EV charging equipment. Homeowners who install qualifying charging equipment at their residence may be eligible for a credit of 30% up to $1,000 per item (for each charging port, fuel dispenser, or storage property). Form 8911 can be used to claim the credit.
Residential Clean Energy Property Credit
These credits are designed to support the purchase and installation of renewable energy systems. They apply for property placed in service after December 31, 2021 and provide a 30% credit for qualified expenditures, including:
Battery storage: The IRA added battery storage technology as an eligible expenditure. This is a method of storing energy from renewable and non-renewable sources in rechargeable batteries for later use
Solar, wind, and geothermal energy generation
Solar water heaters
Fuel Cells
The amount of credit that can be taken is 30% of the total improvement costs in the year of installation. There is no annual maximum except on credit limits for fuel cells. The tax credit allowed for fuel cell property expenditures is 30% up to $500 for each half kilowatt of capacity.
Energy Efficient Home Improvement Credit
Expenses that may qualify under this credit are external doors, windows, insulation materials, HVAC systems, water heaters, furnaces, home energy audits, and more. For qualified expenditures in 2022, the credit offered is 30% of total improvement costs up to a lifetime maximum of $500. For improvements made after 2022, the credit is 30% of the total costs up to a maximum of $1,200 (no lifetime limit).
With the 2024 tax year approaching, it’s important to act now if you plan to claim credits for electric vehicles, solar panels, or energy storage systems, before any potential changes to the IRA take effect. For those planning major home energy improvements or purchasing an EV, the time to do so is before the end of 2024 to ensure eligibility for these valuable tax incentives. As always, speak with your tax and finance advisors for any details that may apply to your particular situation.
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