Clean energy credits are a financial incentive program offered to individuals and companies in the United States aimed at encouraging the use of renewable energy and reducing greenhouse gases. These credits are used to promote the use of low-emission and renewable energy sources, such as solar, wind, geothermal, and biomass.
Per the Environmental Protection Agency (EPA), the goal of clean energy credits is to make renewable energy more accessible and affordable for all Americans.
Clean energy credits are designed to reward people who choose to invest in renewable energy technologies and reduce their carbon footprint.
The credits allow homeowners and vehicle owners alike to reduce the costs associated with owning or operating clean energy sources. There are two main types of clean energy credits available in the US: vehicle credits and home credits
Vehicle Credits
Vehicle credits are offered to consumers in the US who replace an existing gasoline or diesel-powered vehicle with an electric vehicle. These credits can range from up to $7,500 for a plug-in hybrid or all-electric vehicle to $2,500 for a hydrogen fuel-cell vehicle. The credits are available for new vehicles only and can only be used for the purchase of the eligible vehicle.
Home Credit
Home credits are offered to encourage homeowners to switch from traditional fossil fuels to cleaner energy sources. These credits can be for the installation of solar panel systems, energy-efficient furnaces and air conditioning systems, and even heat pumps.
The amount of credits available varies depending on the type of renewable energy system being installed, ranging from a few hundred dollars to thousands of dollars. In addition to the vehicle and home credits, there are also other forms of clean energy credits available. For example, many states offer incentives to promote the adoption of solar energy, such as a tax credit or a rebate. Additionally, some states offer subsidies for the installation of energy-efficient appliances, such as Energy Star appliances.
The US government also offers incentives to encourage businesses to use clean energy, such as the Solar Investment Tax Credit (ITC). This program allows businesses to receive a percentage of their investment back as a tax credit.
Benefits of Clean Energy Credits (Vehicle, Home, and Others)
Below are some of the main benefits of clean energy credits
Reduce Reliance on Fossil Fuel: Clean energy credits encourage people to switch from traditional fossil fuel-based energy sources to renewable energy sources such as solar or wind. This helps reduce dependence on non-renewable energy sources and helps reduce emissions.
Affordable Energy Bills: Clean energy credits help make the energy generated from renewable energy sources more affordable, thus reducing energy bills. The switch to renewable energy sources requires more people to install and maintain the systems. This creates jobs in the clean energy sector, helping to reduce unemployment.
Health Benefits: By reducing emissions, clean energy credits help to reduce air pollution, which can improve human health and promote sustainable development.
Reduced Energy Costs: Clean energy credits help to make renewable energy more affordable, reducing the cost of energy for people and businesses.
Positive Environmental Impact: By reducing emissions, clean energy credits help to reduce climate-changing greenhouse gases in the atmosphere.
Increased Energy Independence: By reducing dependence on imported fossil fuels, clean energy credits help to increase energy independence in the US.
Reduced Energy Waste: Using renewable energy sources helps to reduce energy waste.
Financial Incentives: Many states offer financial incentives in the form of tax credits or rebates to encourage people to switch to renewable energy sources.
Higher Property Values: Installing renewable energy sources on your property can increase its value.
Qualifications
As per IRS:
Anyone may qualify for a credit up to $7,500 under Internal Revenue Code Section 30D if they buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). To qualify, the person must:
- Buy it for their own use, not for resale
- Use it primarily in the U.S.
In addition, the person’s modified adjusted gross income (AGI) may not exceed:
- $300,000 for married couples filing jointly
- $225,000 for heads of household
- $150,000 for all other filers
Only certain vehicles qualify for the tax credit and information about qualified purchases has been updated per the Inflation Reduction Act of 2022 for vehicles purchased from 2023 to 2032. Please be sure to review the IRS guidelines for in-depth information on qualified vehicles.
How to Claim the Credit?
To claim the clean energy credits, you need to file Form 8911. You can discuss claiming your clean energy credit(s) with your tax preparer when it comes time to file your taxes.
How to Maximize Your Clean Energy Credits
To maximize your clean energy credits and make the most of the financial incentives available, there are a few steps you can take:
Research: Before investing in a renewable energy system or purchasing an electric vehicle, research the available incentives and make sure you understand the qualifications.
Install Energy-Efficient Appliances: Make sure to replace all of your old appliances with energy-efficient models.
Purchase an Electric Vehicle: If you are in the market for a new car, consider purchasing a fully electric or plug-in hybrid electric vehicle.
Utilize Solar Energy: Invest in a solar energy system for your home. This can be costly upfront, but the clean energy credits are designed to make solar energy a more affordable option.
Keep Records: Keep accurate records of all your expenditures related to your clean energy investments. This will make it easier to file your taxes and get the maximum credit.
At Exact Tax, we understand how confusing filing taxes can be, especially when it comes to claiming clean energy credits. We can help you simplify the process and maximize your clean energy credits. With our easy-to-use online tax filing system, you can quickly and accurately file your taxes, ensuring that you get all the credits and deductions you’re entitled to. Get started today and get the most out of your clean energy investments. Book a consultation with one of our knowledgeable tax professionals today and start to save.
