Cypress Wealth Services
The Inflation Reduction Act, enacted in 2022, features several tax credits designed to promote environmentally friendly purchases and green energy. While the law was passed last year, most energy-efficient tax benefits officially commenced on January 1, 2023. If you’re considering making energy-efficient home improvements or purchasing an electric vehicle, it’s crucial to explore these four tax incentives to make the most of your money.
This credit was originally capped at a total lifetime amount of $500, but it has been expanded by the Inflation Reduction Act. Taxpayers can now claim up to $1,200 annually for certain home improvement expenditures made on a principal residence between 2023 and 2033. Qualifying expenses include:
Taxpayers can claim 30% of the total amount spent on qualified upgrades. To make it slightly more complicated, each item type has its own credit limit. For instance, exterior doors can only be claimed up to 30% of $250 per door for a total of $500. It’s important to consult with a qualified tax professional to understand your exact credit amount.
This is another credit that allows taxpayers to claim up to 30% on qualified energy-efficient purchases made between 2023 and 2033. The best part: there is no overall limit on the amount of the credit. Qualified expenses include:
As with the Energy Efficient Home Improvement Credit, all purchases must be installed at a principal residence. Purchases or upgrades made at a business or rental property will not qualify for the deduction.
This rebate program allocates $4.5 billion in funding for home electrification projects. These funds will be distributed to the states and administered through separate programs. Though the specifics of each program are still being developed, these rebates will create point-of-sale reductions in the cost of certain appliances such as heat pump water heaters and electric stoves. Qualifying households can claim up to $14,000 in rebates.
If you’re planning to purchase a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) this year, you may qualify for the clean vehicle tax credit. This is a $7,500 credit for qualified taxpayers and vehicle purchases. It is available to both individuals and businesses as long as the vehicle is not bought for resale and is used primarily in the U.S.
Additionally, the vehicle must:
Keep in mind that there are restrictions around which vehicles qualify for the credit. For instance, vehicles with minerals or components sourced from foreign entities of concern such as Russia or China will not qualify. Lastly, the credit is phased out for taxpayers with an AGI above certain limits.
Before embarking on a significant home renovation or investing in an energy-efficient vehicle, it’s crucial to research the potential tax credits available. These credits could save you thousands of dollars in taxes and rebates. If you have any doubts about how the Inflation Reduction Act impacts your specific circumstances, it’s a good idea to enlist the help of a professional. Don’t hesitate to contact us at Cypress Wealth Services. We specialize in efficiently managing tax implications and can guide you to make the most of your expenses. Please get in touch with us by calling 866.888.6563 or contact one of our offices today.
Cypress Wealth Services is an independent RIA firm providing financial planning and investment management to high-net-worth individuals, families, business owners, and institutions. Cypress Wealth Services comprises professionals with diverse backgrounds and extensive experience and qualifications. Cypress Wealth Services serves a broad range of client needs using their experience and expertise to act as a foundation for their client service process. The firm uses The Second Growth, which focuses on efficiently protecting, growing, and transferring the wealth and legacy a person has already built to their loved ones. With financial advisors in Palm Desert, CA, Tustin, CA, Athens, GA, and Anchorage, AK, the firm serves clients across the country with Wealth Management Services, Fiduciary Services, 401(k) Design and Management, Investment Reporting Services, Financial and Retirement Planning, and more. For more information, visit www.CypressWS.com or call 760.834.7250.