The recently enacted Inflation Reduction Act of 2022 contains several new environment-related tax credits that are of interest to individuals and small businesses. The Act also ex-tends and modifies some preexisting credits.
The Act increases the credit for specified nonbusiness energy property expenditures made in a tax year to an amount equal to 30% of the sum of (a) the amount paid or incurred for qualified energy efficiency improvements installed during that year, and (b) the amount of the residential energy property expenditures paid or incurred during that year. The Act extends the date to place property in service until January 1, 2033. The Act repeals the lifetime credit limitation, and instead limits the allowable credit to $1,200 per taxpayer per year.
The Act extends the date you are allowed to put into service residential energy efficient property for solar electric, solar hot water, fuel cell, small wind energy, geothermal heat pump, and biomass fuel property installed in homes in years through 2035. The Act also makes the credit available for qualified battery storage technology expenditures.
The Act changes the dates of service for the New Energy Efficient Home Credit (NEEHC) which is available to eligible contractors for qualified new energy efficient homes acquired by a homeowner through Jan. 1, 2033. The amount of the credit is increased, and can be $500, $1,000, $2,500, or $5,000, de-pending on which energy efficiency requirements the home satisfies and whether the construction of the home meets prevailing wage requirements.
The Act, among other things, retitles the new qualified plug-in elexctric drive motor vehicle (NQPEDMV) credit as the Clean Vehicle Credit and eliminates the limitation on the number of vehicles eligible for the credit. Also, final assembly of the vehicle must take place in North America.
No credit is allowed if the lesser of your modified adjusted gross income for the year of purchase or the preceding year exceeds $300,000 for a joint return or surviving spouse, $225,000 for a head of household, or $150,000 for others. In addition, no credit is allowed if the manufacturer’s suggested retail price for the vehicle is more than $55,000 ($80,000 for pickups, vans, or SUVs).
A qualified buyer who acquires and places in service a previously owned clean vehicle after 2022 is allowed an income tax credit equal to the lesser of $4,000 or 30% of the vehicle’s sale price. No credit is allowed if the less-er of your modified adjusted gross income for the year of purchase or the preceding year exceeds $150,000 for a joint return or surviving spouse, $112,500 for a head of household, or $75,000 for others. In addition, the maximum price per vehicle is $25,000.
There is a new qualified commercial clean-vehicle credit for qualified vehicles acquired and placed in service after December 31, 2022.
The credit per vehicle is the lesser of: 1) 15% of the vehicle’s basis (30% for vehicles not powered by a gasoline or diesel engine) or 2) the “incremental cost” of the vehicle over the cost of a comparable vehicle powered solely by a gasoline or diesel engine. The maximum credit per vehicle is $7,500 for vehicles with gross vehicle weight ratings of less than 14,000 pounds, or $40,000 for heavier vehicles.