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Eco-Friendly Savings: Your Guide to Federal Tax Credits

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Federal tax credits are turning the tide in favor of clean energy solutions and eco-friendly transportation. While some individuals are driven by the desire to reduce their carbon footprint, the added incentive of tax credits is proving to sweeten the deal, making green choices even more appealing.

Whether you are looking to purchase an electric vehicle, make energy-efficiency upgrades and updates to your home, or want to produce your own clean energy, this guide will identify various federal tax incentives you may qualify for.

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“Even if the tax credits aren’t your main motivation, consulting a tax advisor can help ensure you’re maximizing the benefits available to you,” advises Hayden Adams, CPA, CFP®, director of tax and wealth management at the Schwab Center for Financial Research.

Here’s a breakdown of three significant tax credits and how you might qualify for each.

(For state tax credits and deductions, check the Database of State Incentives for Renewables & Efficiency® using your ZIP code.)

man charging his electric vehicle at a charging station , he could earn up to $7500 in tax credits

1. Clean Vehicle Credits

Annual Tax Credit: Up to $7,500, subject to meeting eligibility criteria (refer to “Qualifications below”).

For vehicles acquired between January 1 and April 17, 2023:

  • Base credit: $2,500
  • Additional credit: $417 for vehicles with a battery capacity of at least 7 kilowatt hours, plus $417 for each kilowatt hour of battery capacity exceeding 5 kilowatt hours, up to an additional $5,000

For vehicles acquired after April 18, 2023:

  • Meets battery components requirement: $3,750
  • Meets critical minerals requirement: $3,750
  • Meets both requirements: $7,500

Qualifications:

  • Final assembly in North America
  • Applies to new vehicle purchases
  • Manufacturer’s suggested retail price (MSRP) must not exceed:
    • $80,000 for pickup trucks, SUVs, and vans
    • $55,000 for other vehicles
  • Modified adjusted gross income (MAGI) limits apply:
    • $300,000 for married couples filing jointly and surviving spouses
    • $225,000 for heads of household
    • $150,000 for everyone else

Check vehicle eligibility. Expires: January 1, 2033

man and woman working on their home renovation project to make various energy efficiency upgrades and declare 30%  on qualified improvements towards receiving tax credits.

2. Energy-Efficient Home Improvement Credit

Annual Tax Credit: 30% of qualified improvements, capped at $3,200

Qualifications: Limited to existing homes

Expires: January 1, 2033

Includes:

  • Doors: limited to $250 per door, $500 total
  • Windows: limited to $600 total
  • Heat pumps, biomass boilers, and stoves: limited to $2,000 total
  • Home energy audit: limited to $150 total
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3. Residential Clean Energy Credit

Annual Tax Credit: Up to 30% of qualified improvements with no maximum. (Credit will decrease to 26% in 2033 and 22% in 2034. Credit cannot exceed taxes owed, but excess amounts can be carried forward for future tax years.)

Qualifications: Primary residence (owned or rented), second home if not used as rental; properties must be in the U.S.

Expires: December 31, 2034

Includes:

  • Solar water heaters
  • Solar electric panels
  • Wind turbines
  • Battery storage technology
  • Geothermal heat pumps
  • Fuel cells (limited credit per half-kilowatt capacity)

These tax credits not only reward eco-conscious decisions but also pave the way towards a sustainable future while lightening the financial load. Take advantage of these incentives and make your contribution to a cleaner, greener planet.

Honest Gorilla offers various electricity plans to support those embracing rooftop solar panels or electric vehicles, aligning with your green lifestyle goals.

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