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New Climate Tax Breaks and Savings for Homeowners

Measures that were passed as part of the Inflation Reduction Act will provide homeowners and renters with multiple options to keep money in their wallets. The new climate tax credits are designed to bring down sticker prices by reducing energy consumption because they make environmentally friendly products more affordable for the average family.  However, they are not intended to subsidize those who need a tax break.

The Federal government has appropriated over $41.5 billion to 24 new and existing climate tax credit programs. In simple terms, there are a lot of tax credits, rebates and incentives for switching to climate friendly appliances, cars and more.

For 2023, the percentage eligible for credit has risen to 30 percent in almost all categories. This includes energy efficient items such as air conditioning, heating systems, water heating systems, windows and skylight insulation, exterior doors and more. Even renters qualify on certain expenditures such as appliances.

Qualifications are based on zip code and income levels. For example, you can receive as much as a $7,500 discount on electric cars if you make less than $150,000 and the car costs no more then $55,000. Trucks and vans can cost as high as $80,000. Used cars also can qualify for the tax incentives. Twenty-four states exempt sales tax on electric cars, adding up to significant savings.

In addition, there is federal funding in the way of upfront discounts for low- and moderate-income families. For example, purchasing energy efficient heating and air conditioning systems can put another $1,200 in a homeowners’ pockets. Upgrades to these units will also save on utility bills.

Other items with incentives include insulation, upgrading electric panels, electric stoves and more. Just note that the product identification number must be reported to receive most of these credits. Second homes also qualify for the credits, which is another change from last year.

Rooftop solar systems, wind power, geothermal heat pumps, biomass stoves, air sealing materials and improvements or replacements to panel or subpanel boards are also included on the residential clean energy credit list.

There is no longer a lifetime limit. While the annual limit is capped at $1,500 for some categories, homeowners can carry items over to the following year. The 30 percent-credit is good until 2032 when the amount is reduced to 22 percent for the following two years. The program expires in 2034.

These credits do vary from state to state. Some states, such as California, New York and New Jersey, have additional climate tax incentives for their residents. To receive the credit, file IRS Form 5695. To learn more about the credits, you may qualify for visit https://www.irs.gov/forms-pubs/about-form-5695.

 

The information contained herein is for informational purposes only.  While MMBB made every attempt to ensure that the information is accurate, MMBB is not responsible for any errors or omissions or the results obtained from the use of this information.  MMBB is not liable for any success or failure that is directly or indirectly related to the use of the information contained herein.  The information contained herein does not constitute any financial, insurance, investment, legal, or tax advice.  In no event shall, MMBB and/or its fiduciaries, directors, officers, employees, or agents thereof be liable for any special, direct, indirect, consequential, or incidental damages or any damages whatsoever, whether in action of contract, negligence or tort, arising out of or in connection with the use of the information contained herein.

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