When to claim climate tax credits, rebates

Households may soon be able to claim Thousands of dollars in tax breaks and cuts If they take steps to reduce their carbon footprint.

But green consumers will have to wait until 2023 — perhaps until 2024 or later — to see many of these financial benefits.

President Joe Biden’s Inflation Reduction Act Occurred To act on August 16, representing largest federal investment To fight climate change in US history. Among other measures, the law offers financial incentives to consumers who buy high-efficiency appliances, buy electric cars or install solar panels on roofs, for example.

These incentives and different qualification requirements start according to different timelines. Here’s when consumers can expect to see them and how to decide when to buy.

Consumers He may also be eligible To get additional incentives for electric vehicles from state and local governments or utility providers, according to rules already on the books.

The timing for used cars is relatively simple: purchases are eligible for the new federal tax credit starting in 2023. This “Previously Owned Clean Vehicle Credit” is available through the end of 2032. However, consumers in the used car market may want to wait until 2024 or later ( More on that shortly).

More personal finance:
What to expect from car shopping this Labor Day weekend
Identification fraud has reached an all-time high
48 million households can get free or cheap high-speed internet

The timing of the new vehicles is more complicated. There are three timeframes worth considering, and each has its own advantages and disadvantages: Purchases in 2022, 2023 and 2024 onward, according to Joel Levine, CEO of Plug in America.

A tax cut for new electric cars was already on the books — also worth up to $7,500. But the Inflation Control Act has amended some rules that may limit the qualification in the near term.

One of the rules went into effect when Biden signed the law on August 16, and it says that final assembly of the new car must take place in North America.

In addition, household income for consumers and the retail price of the vehicle It must be less than certain thresholds Starting in 2023 to qualify for a tax exemption.

Consumers buying in 2022 can avoid these requirements; However, they will still be subject to North American final assembly rules that took effect in August. The tax authority And the US Department of Energy Tips to help consumers determine eligible car models.

Many new electric vehicles may not immediately qualify for tax credits in 2023 as companies work to meet new manufacturing rules, according to experts.

“If you want an EV, go buy an EV, [but] Waiting four months for credit is risky, Levine said, adding: “There is a lot of uncertainty about what will be available on January 1st.”

One potential upside is to wait until 2023 or later: Purchases of GM and Tesla models will be eligible. They do not qualify in 2022 due to current restrictions on the tax credit that will expire next year.

“If you look at these two and are really worried about getting [tax] “Credit, you’ll have to wait,” said Levine. Of course, consumers will need to meet the income and selling price rules at that point.

Consumers who buy eligible cars in 2022 or 2023 will only get the tax credit when they file their tax returns — and then only if they have a tax obligation. This means that consumers may wait several months to a year for their benefit, depending on the timing of the purchase.

“If your tax liability is $5,000, you can use $5,000 of the credit — the other $2,500 turns into smut,” Stephen Schmol, a principal at KPMG, said of the new car credit.

Also, reduce inflation Creates two discount programs linked to clean energy and efficiency: One bid up to $8,000 and the other up to $14,000.

Unlike some tax credits, these rebates are designed to be offered at the point of sale – which means upfront savings for consumers.

One point: It likely won’t be widely available until the second half of 2023 or later, according to experts. That’s because the Department of Energy must issue the rules that govern these programs; The states, which will administer the discount programs, must apply for the federal grants; After approval, they can start issuing rebates to consumers.

The law does not specify a time frame required for this process.

Even on the most optimistic timeline, those funds may not become available to consumers until the summer of 2023, according to Cara Sol-Rinaldi, president and CEO of AnnDyl Policy Group, an energy and environmental policy strategy firm.

“It will all depend on how quickly these guidelines are written and put into place,” said Saul Rinaldi, who helped design the rebate programs.

Saul Rinaldi added that some states may also decide not to apply for the grants — meaning that rebates will not be available to homeowners in those states.

The HOMES discount program offers up to $8,000 to consumers who cut home energy via efficiency upgrades, such as insulation or HVAC fixtures. Total savings depend on the reduction in energy and the level of household income.

The High Efficiency Electric Home Discount Program offers up to $14,000. Households get rebates when buying efficient electrical appliances: up to $1,750 for a water heater heat pump; $8,000 for a heat pump to heat or cool premises; And $840 for an electric stove or clothes dryer with an electric heat pump, for example. Non-hardware upgrades such as electrical wiring are also eligible.

Rebates from the High Efficiency program are only available to low-income families, which are defined as those earning less than 150% of the area’s median income.

Steve Nadel, executive director of the American Council on an Energy Efficient Economy, expects most states to participate. He said they were not likely to miss out on free money to residents from the federal government.

He said large countries “that work together and have the employees” may be able to start offering rebates as soon as possible in early 2023.