Resources: Inflation Reduction Act
View the Inflation Reduction Act Guidebook, HERE.
Energy Efficiency Home Improvement Credit
Provides a tax credit for energy-efficiency improvements of residential homes. Credit rate increased from 10% to 30%. Eligibility and standards are modified. $500/per taxpayer lifetime limit eliminated and replaced with increased annual limits.
Period of Availability: 2022-2032
Eligible Recipients: Homeowners; renters for certain improvements
Base Credit Amount: 30% of cost, with limits for each type of improvement and total per year. Credit capped at $600 for “energy property,” e.g. efficient heating and cooling equipment; $600 for windows; $250 per door, $500 total for doors; $2,000 for heat pumps. Total annual credit capped at $1,200, with a separate annual $2,000 limit for heat pumps. $150 credit for home energy audits.
Relevant Announcements:
- Request for Comments on Incentive Provisions for Improving the Energy Efficiency of Residential and Commercial Buildings (10/5/2022)
Residential Clean Energy Credit
Provides a tax credit for the purchase of residential clean energy equipment, including battery storage with capacity of at least 3 kWh. Credit extended at 30% through 2032, with phasedown through 2034. Battery storage newly eligible in 2023; biomass fuel property credit eliminated.
Period of Availability: 2022-2032, with phasedown over 2033-2034.
Eligible Recipients: Homeowners (including renters)
Base Credit Amount: 30% of cost of equipment through 2032; 26% in 2033; 22% in 2034.
Relevant Announcements:
- Request for Comments on Incentive Provisions for Improving the Energy Efficiency of Residential and Commercial Buildings (10/5/2022)
New Energy Efficient Homes Credit
Provides a tax credit for construction of new energy efficient homes. The credit had previously expired at end of 2021. Retroactively extended with new rules effective for homes acquired after 2022.
Period of Availability: 2023-2032
Eligible Recipients: Homebuilders
Base Credit Amount: $2,500 for new homes meeting Energy Star standards; $5,000 for certified zero-energy ready homes. For multifamily, base amounts are $500 per unit for Energy Star and $1000 per unit for zero-energy ready.
Bonus Credit Amount: For multifamily homes, 5 times the base amount if prevailing wage requirements are met. Initial guidance on the labor provisions is available here.
Stackability: Yes. Taxpayers claiming the Low-Income Housing Tax Credit do not have to reduce basis for 45L credits claimed.
Relevant Announcements:
- Request for Comments on Incentive Provisions for Improving the Energy Efficiency of Residential and Commercial Buildings
- Prevailing Wage and Apprenticeship Initial Guidance (11/29/2022) FAQ: Prevailing Wage and the Inflation Reduction Act
Clean Vehicle Credit
Provides a tax credit for purchasers of clean vehicles. Credit extended with new rules pertaining to final assembly in the United States, critical minerals/battery components, and foreign entities of concern. Per manufacturer limit is lifted.
Period of Availability: Generally, vehicles placed in service in 2023-2032. Some of the 30D rules have differing timeframes.
Eligible Recipients: The tax credit is not available for consumers who have adjusted gross incomes for the current or preceding year above $300,000 (couples), $225,000 (heads of household), $150,000 (singles). Not inflation adjusted.
Bonus Credit Amount: $3,750 credit for vehicles meeting critical minerals requirement. The vehicle must contain a threshold percentage of critical minerals extracted or processed in the United States or in a country with which the United States has a free trade agreement, or recycled in North America. Additional $3,750 credit for vehicles meeting the requirement that a threshold percentage of battery components be manufactured or assembled in North America. Vehicles must meet other requirements, including final assembly in North America and MSRP limits (generally $55,000; for vans, SUVs, and pickups $80,000). Starting in 2024, qualifying vehicles cannot have battery components manufactured or assembled by a foreign entity of concern. Starting in 2025, qualifying vehicles cannot contain critical minerals extracted, processed, or recycled by a foreign entity of concern.
Transferability: Yes. Starting in 2024, transferable only to the dealer at point of sale under section 30D(g) but not under section 6418.
Stackability: Cannot claim both 30D credit and 45W credit.
Relevant Announcements:
- Plug-in Electric Drive Vehicle Credit at a Glance (8/16/2022)
- Frequently Asked Questions on the Inflation Reduction Act’s
- Initial Changes to the Electric Vehicle Tax Credit (8/16/2022) Request for Comments on Credits for Clean Vehicles (10/5/2022)
Credit for Previously-Owned Clean Vehicles
To provide a tax credit for purchasers of pre-owned clean vehicles
Period of Availability: Generally, vehicles placed in service in 2023-2032.
Eligible Recipients: Tax credit is not available for consumers who have adjusted gross incomes for the current or preceding year above $150,000 (couples), $112,500 (heads of household), $75,000 (singles). Individuals can claim only once per three years. Vehicles must be sold by a dealer; the sale price must be $25,000 or less; and it can only be claimed once per vehicle.
Base Credit Amount: The lesser of $4,000 or 30% of sale price
Transferability: Yes. Starting in 2024, transferable only to the dealer at point of sale under section 25E(f) but not under section 6418.
Stackability: No rules
Relevant Announcements:
- Request for Comments on Credits for Clean Vehicles (10/5/2022)
Credit for Qualified Commercial Clean Vehicles
Provides a tax credit for purchasers of qualified commercial clean vehicles
Eligible Recipients: Businesses that acquire motor vehicles or mobile machinery for use or lease; tax-exempt entities that acquire them for use.
Base Credit Amount: The amount of the credit is the lesser of (a) 15% of the vehicle’s basis (i.e. its cost to the purchaser) or 30% for vehicles without internal combustion engines, or (b) the amount the purchase price exceeds the price of a comparable internal combustion vehicle. The credit is capped at $7,500 for vehicles < 14,000 lbs and $40,000 for all other clean vehicles.
Direct Pay Eligibility: Yes, for states, political subdivisions, tax-exempt organizations (other than co-ops described in section 521), and Indian Tribal governments.
Stackability: Cannot claim both the 30D credit and 45W credit.
Relevant Announcements:
- Request for Comments on Section 45W Credit for Qualified Commercial Clean Vehicles (11/3/2022)
Alternative Fuel Vehicle Refueling Property Credit
Provides a tax credit for alternative fuel vehicle refueling and charging property in low-income and rural areas. Alternative fuels include electricity, ethanol, natural gas, hydrogen, biodiesel, and others.
Period of Availability: January 1, 2023-December 31, 2032
Eligible Recipients: Tax credit for consumers and businesses. The qualified alternative fuel vehicle refueling property must be for clean- burning fuels, as defined in the statute, and must be located in low-income or rural areas.
Base Credit Amount: 6% of the cost for businesses, limited to a $100,000 credit per item of
property for businesses. 30% for individuals, limited to $1,000.
Bonus Credit Amount: Businesses can claim a 30% credit for projects meeting prevailing wage
and registered apprenticeship requirements. Initial guidance on the labor provisions is here.
Direct Pay Eligibility: Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops.
Transferability: Yes, for property used in a trade or business. Stackability: No rules
Relevant Announcements:
- Request for Comments on Section 30C Alternative Fuel Vehicle Refueling Property Credit (11/3/2022)
- Prevailing Wage and Apprenticeship Initial Guidance (11/29/2022)
FAQ: Prevailing Wage and the Inflation Reduction Act
FAQ: Apprenticeships and the Inflation Reduction Act