The Residential Clean Energy Credit
The Residential Clean Energy Credit is an incentive provided by the Internal Revenue Service (IRS) to encourage homeowners to invest in renewable energy systems for their residences. If you’ve made energy-saving improvements to your home, such as installing solar panels, wind turbines, geothermal heat pumps, or fuel cells, you may qualify for this tax credit.
How It Works
The credit equals 30% of the costs associated with new, qualified clean energy property installed in your home between 2022 and 2032, 26% for property placed in service in 2033 and 22% for 2034.
Fuel cell property has specific limits: $500 per half kilowatt of capacity for individual homeowners.
While the maximum credit you can claim each year is $1,200 for energy property costs and certain energy efficient home improvements, additional limits also apply:
- Exterior Doors: The credit is limited to $250 per door and $500 total
- Exterior Windows and Skylights: The credit is limited to $600 total
- Central Air Conditioners or Hot Water Boilers: the credit is limited to $600 total
- Home Energy Audits: the limit is $150
- $2,000 per year for qualified heat pumps, heat pump water heaters, biomass stoves, or biomass boilers.
The credit is nonrefundable, meaning it can’t exceed your tax liability. However, any unused credit can be carried forward. Importantly, there is no lifetime limit on this credit.
Who Qualifies
You can claim the credit for improvements to your main home, whether you own or rent it. The credit applies to:
- New or existing homes located in the United States
- Landlords or property owners who don’t live in the home are not eligible.
- You may also qualify for a credit on a second home (part-time residence) located in the U.S.
Business Use of Home
If you use a property exclusively for business purposes, you cannot claim the credit. However, if your home serves both residential and business purposes:
- For business use up to 20%, you are eligible for the full credit.
- For business use exceeding 20%, the credit is calculated based on the proportion of expenses allocated to non-business use.
Qualified Expenses
Qualified expenses include the costs of new clean energy property, such as:
- Solar electric panels
- Solar water heaters
- Wind turbines
- Geothermal heat pumps
- Fuel cells
- Battery storage technology (beginning in 2023)
- Labor costs for installation and connection to your home are also eligible.
- Used (previously owned) clean energy property does not qualify.
Clean Vehicle Credits
You can get a credit of up to $7,500 if you buy a new, qualified plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after. A vehicle must have a battery capacity of at least 7 kilowatt hours and a gross vehicle weight rating of less than 14,000 pounds.
The vehicle’s manufacturer suggested retail price cannot exceed: $80,000 for vans, sport utility vehicles and pickup trucks, and $55,000 for other vehicles.
To qualify you must:
- Use the vehicle for personal purposes primarily in the U.S
- Meet income thresholds: modified adjusted gross income cannot exceed $300,000 for MFJ or QSS, $225,000 for HOH, $150,000 for all other filers
For Previously-Owned Clean Vehicle Credit:
- Sale price cannot exceed $25,000
- Maximum credit is the lesser of $4,000 or 30% of the sales price
Don’t hesitate to contact the Paxel team today to explore how you can benefit from these incentives and contribute to a cleaner, more sustainable future for yourself and your community. Every step towards clean energy and eco-friendly transportation counts, and we’re here to support you along the way.