The Inflation Reduction Act (IRA), passed in 2022, introduced several tax credits to incentivize clean energy adoption. However, with the incoming administration signaling potential changes, it’s wise to act quickly to maximize these benefits.
President-Elect Donald Trump has pledged to repeal the IRA and rescind unspent funds, a move that would require Congressional approval. With Republicans set to control both chambers in January, there’s a possibility that some provisions of the law could be repealed by 2025. While the credits were originally designed to last for years, changes in Washington may shorten their availability.
If you’ve been considering any of the eligible purchases below, now is the time to act. Many of these credits apply to purchases made by December 31.
1. Home Energy Efficiency Upgrades
Homeowners can significantly reduce their tax bill by investing in energy-efficient home improvements:
Energy Efficient Home Improvement Credit: Covers 30% of the cost of eligible upgrades, such as energy-efficient windows, doors, and insulation, up to $1,200 per year. For qualified heat pumps, water heaters, biomass stoves, or boilers, the credit increases to $2,000.
Residential Clean Energy Credit: Applies to renewable energy installations like solar panels, wind turbines, and geothermal systems, covering 30% of the installation cost.
Energy Efficient Property Credit: Focuses on clean energy investments, offering 30% coverage for solar water heaters and other eligible systems.
2. Clean Vehicle Tax Credit
Purchasing an electric vehicle (EV) or fuel cell vehicle (FCV) may qualify you for substantial savings:
New Vehicles: A tax credit of up to $7,500.
Pre-Owned Vehicles: A tax credit of up to $4,000.
To qualify, the vehicle must meet specific requirements, including price caps and buyer income limits. You can claim the credit on your tax return or transfer it to the dealer at purchase to reduce the vehicle’s cost directly.
3. EV Charging Equipment Credit
Installing a home EV charging station can also yield savings. The credit covers 30% of the cost, up to $1,000, making it easier for households to support electric vehicle adoption.
Why Act Now?
These IRA tax credits are not only a powerful tool for reducing your federal tax bill but also a direct way to support clean energy initiatives. Tax credits reduce your tax liability dollar-for-dollar, making them more valuable than deductions, which only lower taxable income.
In 2023, around 750,000 taxpayers claimed credits for rooftop solar panels. Beyond federal credits, state or local utility incentives might further enhance your savings. To ensure your purchase qualifies, consult with your VAAS tax professional before making a significant investment. Don’t miss this opportunity—these benefits may not last long.