What Are the Residential Solar Tax Credit Amounts in 2023?
Want to get the most out of your taxes this year? Are you looking for ways to save money on your taxes? Get excited about the new federal tax credits for 2023. We cover everything you need to know about these new tax credits and how they can help you save money.
Know Your Solar Tax Credit Eligibility for 2023
The recently passed Inflation Reduction Act has expanded and introduced several tax credits that can benefit individuals and businesses alike. Among the credits are those for new electric vehicles (EVs), generating your own electricity, and low-income households. The IRS has also updated existing incentives and created new ones to help offset the cost of new EVs and energy storage technology. These changes are expected to be reflected in the IRS’s Notice of Proposed Rulemaking in March 2023. Understanding the available tax credits can help taxpayers make informed decisions about their filing this year.
Tax Credit for New Electric Vehicles (EVs)
In the year 2023, the federal government is providing generous tax credits for the purchase of new electric vehicles (EVs). Under the Internal Revenue Code Section 30D, qualified plug-in EVs are eligible for up to $7,500 in federal tax credits. As of January 1st, 2023, qualifying used EVs priced below $25,000 can qualify for up to $4,000 in federal tax credits. The historic climate law extended and amended the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), allowing for a maximum credit of $7,500 for new EVs, and up to $4,000 limited to 30% of the sale price for used EVs. This is an incredible opportunity for those looking to make the switch to electric vehicles and reduce their carbon footprint.
The Inflation Reduction Act
The Inflation Reduction Act, or IRA, was passed in August 2022 and is designed to reduce inflation through tax credits. This groundbreaking law provides a range of new federal tax credits, including up to $7,500 for purchases of new electric vehicles (EVs) in 2023 and after, up to $4,000 for used EVs, and up to 20 percentage points for solar investments. The law also includes tax credits for generating your own electricity and for low-income families. With these incentives in place, the Inflation Reduction Act looks to provide relief to millions of Americans while simultaneously reducing inflation.
Tax Credit for Generating Your Own Electricity
The Inflation Reduction Act also incentivizes renewable energy and energy efficiency with a tax credit for generating your own electricity. Under the act, individuals and businesses that install qualifying property in service between January 1, 2023 and January 1, 2033 can get a credit of up to $3,200 annually. This provides a great opportunity to save money on electricity while also doing something positive for the environment.
Tax Credit for Low-Income Families
Low-income families may also be eligible for a number of federal tax credits. The Low-Income Housing Tax Credit (LIHTC) program is a tax incentive program designed to increase the supply of quality, affordable rental housing for those who need it most. The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) offer financial relief to qualifying low-income households, while the new federal EV tax credit can provide up to $3,200 annually to lower the cost of energy efficient home improvements. For individuals and families who are saving for retirement, the Saver’s Tax Credit provides an additional incentive with a maximum income of $34,000 for single filers, $51,000 for heads of household, and $68,000 for those filing jointly. These new tax credits provide an important opportunity for low-income households to improve their financial situation and gain access to the resources they need.