Tax Provisions that Take Effect in 2022
The following tax credits from the Inflation Reduction Act go into effect for Tax Year 2022:
Nonbusiness Energy Property Credit
This credit was renamed in the Inflation Reduction Act and is now called the Energy Efficient Home Credit.
The credit rate is increased to 30% with an annual limit of $1,200 per taxpayer ($2,000 for heat pumps and biomass stoves).
Replaces lifetime cap on credits with a $1,200 annual credit limit, including $600 for windows, $500 for doors, and $600 for each item of other qualified energy property. Increases limit to $2,000 for heat pumps and biomass stoves. Removes eligibility on roofs.
Alternative Fuel Vehicle Refueling Property Credit
Taxpayers are eligible for a credit of up to $1,000 for residences and $30,000 for businesses for the cost of any qualified alternative fuel vehicle refueling property installed by a business or at a taxpayer’s residence for tax years 2022 – 2032.
The credit is the lesser of 30% of the costs or $30,000 for businesses or $1,000 for residences.
Plug-in Electric Drive Vehicle Credit
For the existing Plug-in Electric Drive Vehicle Credit, a qualifying electric vehicle that was purchased after August 16, 2022, must have had its final assembly done in North America.
Tax Provisions that Take Effect in 2023
The following tax credits from the Inflation Reduction Act go into effect beginning in Tax Year 2023:
Premium Tax Credit
The Inflation Reduction Act expanded eligibility provisions that were expiring at the end of 2022 have been extended to 2023 – 2025. These provisions are:
The phase-out for households with annual incomes above 400% of the federal poverty level is eliminated.
The credit is increased by reducing the percentage of annual income that eligible households are required to contribute toward health insurance premiums.
Clean Vehicle Credit
Taxpayers who purchase a qualifying clean vehicle are eligible for up to a $7,500 nonrefundable credit for years 2023 – 2032. The credit is broken down into two parts:
-$3,750 for meeting the critical minerals requirement
-$3,750 for meeting the battery components requirement
To be an eligible clean vehicle, the final assembly of the vehicle must have been in North America.
Clean vehicles include plug-in electric vehicles with a battery capacity of at least 7 kilowatt hours and fuel cell vehicles.
The credit would not be allowed if the taxpayer’s current or preceding year’s modified AGI exceeds $300,000 for MFJ, $225,000 for Head of Household, and $150,000 for all other filers.
Credit for Previously Owned Clean Vehicles
Credit is for taxpayers who purchase a used qualified clean vehicle for years 2023 – 2032.
Credit is up to $4,000 and is limited to 30% of the vehicle’s purchase price.
Commercial Clean Vehicle Credit
Credit is for taxpayers who purchase qualified commercial clean vehicles for Tax Years 2023 – 2032.
The credit is the lesser of:
15% of the vehicle’s cost (30% for vehicles not powered by a gasoline or diesel engine;
Or
the incremental cost of the vehicle relative to a comparable vehicle
Credit limit is $7,500 for vehicles weighing less than 14,000 pounds (Class 1 – 3) or $40,000 for vehicles 14,000 pounds or more (Class 4 and above).
Residential Energy Credit
In the Inflation Reduction Act, this credit was renamed the Residential Clean Energy Credit.
Extends the credit through 2034 (was set to expire at end of 2023).
Credit would increase to 30% through 2032 then decrease to 26% for 2033 and 22% for 2034.
Energy Efficient Commercial Building Deduction
The Section 179D deduction was modified for eligible property that is placed in service after December 31, 2022.
The deduction increases the maximum deduction to $5.00 per square foot and will be subject to an annual inflation adjustment.