DISCLAIMER: While it may be tempting to fall asleep while reading this blog, we promise it will be worth your time. Who doesn’t like free money? Here we go.In an attempt to curtail skyrocketing inflation, President Biden signed the Inflation Reduction Act of 2022 into law, focusing, in part, on environmental change initiatives through tax credits that will affect both individuals and small businesses.
The Clean Vehicle Credit can be taken for new and previously owned clean vehicles. For new vehicles placed in service after December 31, 2022, the tax credit will be limited to $7,500 based on the vehicle price and the purchaser’s modified adjusted gross income. The assembly must take place in North America.
If a person purchases and places a previously owned clean vehicle in service after 2022, the tax credit will be limited to the lesser of $4,000 or 30% of the vehicle’s sale price, subject to income limitations. For used vehicles, the maximum sales price is limited to $25,000 per vehicle.
Additionally, the act added a qualified commercial clean-vehicle credit for vehicles, which is limited to the lesser of 15% of the vehicle’s basis or the excess of the purchase price for a particular vehicle over the price of a comparable vehicle powered by a gasoline or diesel engine. The maximum credit for vehicles weighing less than 14,000 pounds is $7,500 or $40,000 for heavier vehicles.
Beginning in 2023, the Energy Efficient Home Improvement Credit will go from a $500 lifetime limit to a $1,200 annual limit covering heat pumps, energy-efficient water heaters, panels, furnaces, windows, and many other improvements. Additionally, there will be the following annual limits for specific types of improvements:
The Residential Clean Energy Credit includes geothermal, small wind, solar installations, and fuel cell power to produce electricity, and the credit increases from 26% to 30% from 2022 to 2023. In 2023, this credit will also apply to battery storage technology with a capacity of at least three-kilowatt hours.
See? That wasn’t so bad. You probably still have questions about this law’s application to your situation. Reach out to Brian Lichter for assistance.
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