Several clean energy tax incentives will expire in the next few months under the recently passed OBBBA Act.
Clean Vehicle Credit
Under the Inflation Reduction Act (IRA) of 2022, eligible taxpayers could claim up to $7,500 for new electric vehicles and fuel cell vehicles based on the sourcing of battery components and critical minerals, originally scheduled to expire after 2032. Under the recently passed OBBBA Act, that credit will terminate for purchases made after September 30, 2025 instead.
For vehicle purchases made until September 30, the credit applies to qualifying “clean vehicles,” including electric vehicles, hydrogen fuel cell cars and plug-in hybrids. The maximum credit for new vehicles is $7,500, based on meeting certain income limits, MSRP caps, and sourcing requirements for critical minerals and battery components. Qualified vehicles also must undergo final assembly in North America.
Similar but lower credits may apply to used qualifying clean vehicles
Clean Vehicle Business Credit
The OBBBA also eliminates a similar tax incentive available for use of clean vehicles by businesses. The Qualified Commercial Clean Vehicle Credit (Sec. 45W) had been scheduled to expire after 2032. As a result of the OBBBA, it will apply only to vehicles acquired on or before September 30, 2025. Depending on vehicle weight, the maximum credit is up to $7,500 or $40,000, with additional rules and limits.
If you plan to take advantage of one of these vehicle credits before expiration, check whether the vehicle you want to buy is qualified and that you would indeed be eligible to claim the credit.
Home Energy Tax Credits
Under the Energy Efficient Home Improvement Credit, eligible taxpayers currently can receive a 30% tax credit for certain expenses, including energy-efficient windows, doors, skylights, insulation materials, heat pumps and home energy audits.
The maximum credit you can claim each year is $1,200 for energy-efficient property costs and certain energy-efficient home improvements. Separate additional annual limits up to $2,000 apply to heat pumps, heat-pump water heaters, and biomass stoves/boilers.
The credit was to expire at the end of 2032. Under the OBBBA, the credit will expire for property placed in service after December 31, 2025.
The Residential Clean Energy Credit for residential rooftop solar was also terminated after 2025 by OBBBA. The credit remains for qualifying installations through 2025.
If you have questions regarding any of these clean energy credits or other accounting and tax related topics, please don’t hesitate to contact our office at 727-327-1999 OR info@accpas.com.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
