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The top 3 climate-friendly tax credits coming out in 2023

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Earlier this year, Congress passed the largest climate change bill in history. The bill was covered up under the name “Inflation Reduction Act”. Economists say the bill may not curb inflation much, but he could be one of the big things for countries moving away from fossil fuels.

Starting in the new year, the bill will provide households with thousands of dollars to move from fossil fuel-burning heaters, stoves and cars to cleaner versions. Starting January 1, middle-income households will be able to take advantage of his six-plus tax credits, including electric stoves, automobiles and rooftop solar. And from mid-2023, low-income households will be able to prepay for some of the same appliances at discounted prices. You don’t have to declare taxes to receive cashback. This handy online tool shows you what you might be eligible for, depending on your qualifications. Zip code and income.

But which credits should Americans focus on, and which ones are most climate-friendly? increase.

Heat pumps — the best choice for decarbonizing your home

Tax credits available on January 1: 30% of cost, up to $2,000

Ah, heat pumps — one of the most popular technologies in the transition to clean energy. A “heat pump” is a bit of a misnomer for these machines, like a combination of ultra-efficient air conditioning and heating systems. move They are 3 to 5 times more efficient than traditional gas or electric resistance heaters because they generate heat instead of generating heat.

Sage Briscoe, senior federal policy manager at clean energy think tank Rewiring America, said: (Heat pumps have become so iconic that Rewiring America even has a heat pump mascot.)

Heat pumps can cost huge When CO2 savings. One analysis using data from the National Renewable Energy Laboratory found that switching to heat pumps could save homeowners $100 to $1,200 a year in heating costs and prevent 1 to 8 tons of carbon dioxide emissions annually. For comparison, going vegan for a year saves about a ton of CO2 emissions.

However, many consumers encounter obstacles when switching to heat pumps. In some areas, it can be difficult to find a contractor who is trained and willing to do the installation. Some homeowners report that contractors are sharing false information about their heat pumps, such as that they don’t work in cold weather. It can even heat a house if it gets down to 31 degrees.) Briscoe recommends that homeowners look for skilled contractors who know about heat pumps, do some preliminary research, and find out which model is best suited for their home. You may be

Electric vehicles — the best option for reducing vehicle emissions

Tax credits available on January 1: Up to $7,500 depending on car make and model

Income limit: <$150,000 Single Filer; <$300,000 Joint Filer

Like millions of Americans living in communities without adequate public transportation, the best way to decarbonize transportation is to switch to electric vehicles. But electric cars can be prohibitively expensive for many Americans.

Starting January 1, the new EV tax credit will give consumers up to $7,500 off their electric vehicle purchases. For the first few months, an American can get a discount from his $3,751 to $7,500 off his EV purchase, depending on the size of the car’s battery.

According to the new law, there are restrictions. Vehicles must also be assembled in North America, vehicles over $55,000 are not covered, and vans and trucks over $80,000 are not covered. This week, the Internal Revenue Service provided a list of vehicles that are expected to meet the standards starting January 1.

However, starting around March, the $7,500 credit will be split into two parts. Consumers can receive a $3,750 credit if they have a battery in their vehicle that contains at least 40% vital minerals from the United States (or any country that the United States provides free of charge). -trade agreement with) and if at least 50% of the battery’s components are assembled and manufactured in North America, he will additionally receive a credit of $3,750. These rules have not yet been finalized, so the tax credit starting January 1 is a temporary measure until the White House decides on the final version.

What the New Electric Vehicle Tax Credit Means

Joe Britton, executive director of EV industry group Zeta, said this wider There should be a larger group of vehicles eligible for the full tax credit in January and February than later in 2023. For this reason, he recommended that potential EV owners act quickly in his 2023.

“I plan to buy a car in the first quarter,” he said.

Rooftop solar power — the best choice for generating clean energy

Currently available tax credits: 30% of installation cost, no cap

There are always solar panels on the roof for those who want to generate their own clean energy. This tax credit has been available in practice since the Inflation Reduction Act was passed in August 2022. This provides a tax credit equivalent to 30% of the cost of installing rooftop solar with no cap. According to Rewiring America, an average 6-kilowatt solar installation costs about $19,000 and the average solar tax credit is about $5,700. (The Inflation Reduction Act also includes a 30% tax credit for homeowners who need to upgrade their power panels for solar on their roofs, and a 30% tax credit for installing battery storage.)

Solar panels can save homeowners tens of thousands of dollars in utility bills. It can also provide a backup of power in the event of power outages or other disasters when combined with storage batteries. For those looking to keep their entire home away from fossil fuels, solar panels are even more appealing. Switch everything to electric and make electricity very cheap with the help of the sun.

There are other options for those who do not own their own home. Tenants can subsidize community solar projects to reduce electricity bills and indirectly benefit from tax credits.

Tips, tricks and notes

Many other credits will be issued in 2023, including EV chargers (up to $1,000), heat pump water heaters (up to $2,000) and cash for sealing home doors and windows (up to $1,200). increase.

According to Briscoe, the most important thing to know is whether you qualify for an upfront discount for low- and middle-income Americans that won’t be available until late 2023 or tax credits that will become available on January 1. I don’t know. (Try this tool.) If you’re going the tax credit route, it’s a good idea to spread your upgrades over multiple years, as there are annual limits on how many credits you can claim in a given year. And it won’t always be easy, she warned. Finding the right installer and the right information on how to make use of all available government resources can be difficult.

Ultimately, however, Briscoe said: how You start decarbonizing Your life doesn’t matter that much Start-up.

“It’s like a diet or any other change in life,” she said. “You have to take the first step and then take the next.”

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