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  • Writer's pictureJiayi (Kristy) Xu, MBA, CFP®

Tax Credits that you may qualify for by being Energy Efficient

The recent Tesla price cut had brought much attention to the tax credits for clean energy. Below are some of the energy incentive tax credits that you would not want to miss.


Clean Vehicle Tax Credit

If you buy a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after, you may qualify for a clean vehicle tax credit. On January 1, 2023, the Inflation Reduction Act of 2022 qualified certain electric vehicles (EVs) for a tax credit of up to $7,500. To qualify, you must:

· Buy it for your own use, not for resale

· Use it primarily in the U.S.

In addition, your modified adjusted gross income (AGI) may not exceed:

· $300,000 for married couples filing jointly

· $225,000 for heads of households

· $150,000 for all other filers

Note that you can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in 1 of the two years, you can claim the credit.

You can use this LINK to check if the vehicle you are interested in purchasing is qualified for the tax credit.


Residential Clean Energy Property Credit

The residential clean energy property credit is a 30-percent credit for certain qualified expenditures made by a taxpayer for residential energy efficient property. The IRA extended the residential clean energy property credit through 2034, modified the applicable credit percentage rates, and added battery storage technology as an eligible expenditure. The credit applies for property placed in service after December 31, 2021, and before January 1, 2033. The credit percentage rate phases down to 26 percent for property placed in service in 2033, 22 percent for property placed in service in 2034, and no credit is available for property placed in service after December 31, 2034.

The following residential clean energy expenditures are eligible for a Residential Clean Energy Property Credit of 30% of the cost. You can use the links below to check for your eligibilities.

Heating & Cooling Tax Credits

Water Heating Tax Credits

Building Products Tax Credits

For building products purchased and installed between January 1, 2023 and December 31, 2032. You can also claim a 30% tax credit with a limited maximum amount credited. You can use the links below to check for your eligibilities.

Electric Panel Upgrade

For Electric Panel upgraded between January 1, 2023 and December 31, 2032. You can also claim a 30% tax credit with a limited maximum amount credited. You can use the links below to check for your eligibilities. (https://www.energystar.gov/about/federal_tax_credits/electric_panel_upgrade)


In addition to limits on the amount of credit you can claim for any particular equipment installation or home improvement, there are annual aggregate limits. The overall total limit for an efficiency tax credit in one year is $3,200. This breaks down to a total limit of $1,200 for any combination of home envelope improvements (windows/doors/skylights, insulation, electrical) plus furnaces, boilers and central air conditioners. Any combination of heat pumps, heat pump water heaters and biomass stoves/boilers are subject to an annual total limit of $2,000. Given the way the annual aggregate limits are structured, you may want to spread your improvements over a few years. If your heating or cooling system is old, and you are considering a new air source heat pump, it is always wise to optimize your attic insulation first, so you don’t pay for more heating and cooling than you actually need. Making these upgrades together in one year would allow you a tax credit of up to $1,200 for the insulation and up to $2,000 for the heat pump. Similarly, you could combine a heat pump installation with window/door replacements. In that scenario, the $2,000 credit for the heat pump could be combined with tax credits up to $600 total for the windows/skylights plus $500 for two or more doors. If you replace your water heater the following year, you would be eligible for another 30% tax credit, up to $2,000 plus up to $600 if you need an electric panel upgrade to accommodate the new water heater.


If you would like to discuss more about this or any other financial planning or investment management subjects with me but are new to my firm, let’s set up a FREE introductory meeting to get started!

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