Now that the Inflation Reduction Act has been signed into law, you may be wondering how it might affect your tax return. While there are many changes that could affect you, it is important to note upfront that the $10,000 deduction cap for state and local tax has not changed and will remain in effect through 2025.
However there are several things that you might have to look forward to especially if you or your business use or are planning on implementing energy efficiency enhancements. The Inflation Reduction Act includes updates to the tax credits for residential energy improvements as well as for businesses with energy efficient buildings. These changes also impact the credit for electric vehicles for individuals and clean vehicles for businesses.
Specifics for these programs include rebates or credits for things such as electric water heaters, and stove tops and energy efficient windows in addition to the solar tax credit discussed in our previous article that will now allow you to deduct 30% of eligible costs of the installation. This 30% tax credit will last through 2032 and then begin decreasing in the following years. The tax credit for buying an electric vehicle can be as high as $7,500 for a new car or $4,000 for purchasing one used. Not only will many of these credits help save you money directly on your tax return, they can also help lower your energy costs long term as well.
Many of the changes in the act will not begin until 2023 at the earliest, but you can reach out to us at firstname.lastname@example.org and a partner will get back to you to discuss these changes. We can help determine how they may affect you so you can be prepared for the future and plan how to best take advantage of any changes that will benefit you.