2023 Energy Tax Credits

The Inflation Reduction Act (IRA) has revolutionized energy tax credits, opening up new opportunities for individuals and businesses to adopt energy-efficient practices.

This blog post explores key provisions of the IRA, such as residential energy credits, electric vehicle tax credits, energy incentives for businesses, commercial clean vehicle credits, and the updated Section 179D benefiting commercial building owners.

These measures (effective 1/1/23) not only promote sustainability but also offer financial incentives for cleaner and more efficient energy solutions. Discover how the IRA is shaping a greener and more cost-effective future for all.

Residential Energy Credits

• Individuals can claim a credit equivalent to 30% of expenses related to qualified energy-efficient improvements installed during the year, residential energy property expenses, and home energy audits.
• The nonrefundable Residential Energy Credits can be used annually and are composed of the following:
  • Maximum credit of $1,200 for energy property costs and certain energy-efficient home improvements, with limits of certain improvements
  • $2,000 for qualified heat pumps, biomass stoves, or biomass boilers

Electric Vehicle Tax Credit

• There is an electric vehicle tax credit of up to $7,500 for some new electric vehicles and $4,000 for some used electric vehicles. The rules are very specific on which vehicles qualify.

Energy Incentivizing Credits for Businesses

• The Refueling Property Credit allows businesses installing EV charging stations on/after January 1, 2023, to receive a credit equal to 6% of project costs, up to $100,000 per station. However, stations must be installed in census tracts meeting the following criteria:
  • 20% or higher poverty rate
  • Non-Metropolitan Areas: Median family income is less than or equal to 80% of the statewide median
  • Metro Areas: Median family income is less than or equal to 80% of the metro-area median

Commercial Clean Vehicle Credit

• Allows businesses to take advantage of qualified commercial clean vehicles that are placed in service after December 31, 2022.
• This credit consists of the lesser of 15% the basis of the vehicle (30% if the vehicle is not powered by a gasoline or diesel internal combustion engine) or the incremental cost of the vehicle compared to other vehicles.
• However, there are a series of tests that the vehicle must meet in order to qualify as a commercial clean vehicle.
• However, the credit is limited to $7,500 for a vehicle with a gross vehicle weight rating (GVWR) of less than 14,000 pounds and $40,000 for other vehicles.

Commercial Building Owners – Section 179D

• The IRA also made changes to Section 179D which will allow commercial building owners to receive a tax credit up to $5 per square foot to support energy efficiency improvements that deliver lower utility bills.
• Other programs that will benefit small businesses include tax credits covering 30% of the costs of installing low-cost solar power.

Ready to take advantage of the enhanced energy tax credits and embrace a greener future? Consult your Wilkins Miller advisor to make the most of the IRA’s provisions.