When it comes to taxes, nothing is better than a tax credit since it is a dollar-for-dollar reduction in the taxes you must pay (unlike a tax deduction that only reduces your taxable income). 

In other words, a $1,000 credit saves you $1,000 in taxes. The Inflation Reduction Act extends and expands three tax credits intended to encourage homeowners to make their homes more energy efficient and facilitate the use of electric vehicles. 

2023 Energy Efficient Home Improvement Credit

The 2023 Energy Efficient Home Improvement Credit helps homeowners pay for various types of energy efficiency improvements, including:

The old credit contained a tiny $500 lifetime cap. The new credit gives you a $1,200 annual cap along with specific caps on some improvements. Overall, you can perform many energy efficiency projects over several years and collect a credit each year.

Residential Clean Energy Credit

Most taxpayers earn the Residential Clean Energy Credit by installing solar improvements. Two good things here. First, the new law extends the credit through 2034. Second, the new law increases the credit from 26% - 30% percent for eligible property placed in service in 2022 through 2032. 

There is no annual or lifetime cap on this credit. The average solar project cost on a home is over $20,000, so this credit can save you more than $6,000. 

You can also apply this credit to the cost of storage batteries, solar water heaters, geothermal heat pumps, small residential wind turbines, and residential fuel cells.

Home Electric Vehicle Charger Credit

The new law extends the tax credit for installing a home electric vehicle charger through 2032. The amount of credit remains the same: a non-refundable credit equal to 30% of the cost of a home charger, capped at $1,000. But starting in 2023, the credit will be available only for homeowners who live in low-income or rural areas.

If you would like guidance on getting the most out of deductions and tax credits like this one, click here to schedule an appointment with one of Gold Standard's seasoned tax accountants.

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