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June 5, 2023

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How to Make the Most of Energy Tax Incentives in 2023

The Inflation Reduction Act (IRA) of 2022 offers substantial benefits and energy tax incentives for businesses and homeowners seeking to lower costs and embrace sustainability. Through provisions that support clean energy, the IRA provides a variety of incentives, rebates, and tax credits that can lead to significant savings. In this blog post, we will discuss several strategies that will help you optimize energy tax credits, gain financial advantages, and prioritize energy efficiency.

Top Small-Business Energy Tax Credits

Business owners have an opportunity to save on energy costs and contribute to a sustainable future through a range of enticing tax credits. First, by transitioning to low-cost solar power, businesses can benefit from a tax credit that covers 30% of the expenses incurred during the transition. This tax credit will begin to phase out in 2033, eventually being reduced to 0% by 2035.

Moreover, businesses can receive a tax credit of up to $5 per square foot for implementing energy-efficient improvements that lower utility expenses, offering both environmental and economic advantages. The credit amount per square foot increases if the business meets certain prevailing wage and apprenticeship targets.  Examples include upgrading lighting systems, improving insulation, and installing high-efficiency HVAC systems. You can also opt for an energy audit by a professional or use a checklist to begin the process with your maintenance manager.

Additionally, for those considering the purchase of clean commercial vehicles, such as electric or fuel cell models, there are tax credits available up to 30% of the purchase costs. These credits can be obtained through the Clean Commercial Vehicle Credit, and there is no limit on the number of credits that can be claimed. This means that businesses can take full advantage of these incentives to enhance their sustainability efforts and reduce operational costs simultaneously.

Top Energy Tax Incentives for Homeowners

The Inflation Reduction Act (IRA) of 2022 offers homeowners an opportunity to save on energy costs as well. These incentives can translate into reduced utility expenses and monthly bills. So, how can you make your home more energy-efficient while maximizing your financial advantage?

Upgrade to Energy-Efficient Appliances

The IRA offers rebates that cover a substantial portion, if not the entire cost, of purchasing and installing energy-efficient appliances. Heat pumps, water heaters, clothes dryers, and ovens are just a few examples. For instance, you may be eligible for rebates of up to $2,000 to replace your furnace or air conditioner with an electric heat pump, providing more efficient heating and cooling.

Make Home Improvements

Improving your home’s energy efficiency can lead to long-term cost savings. The IRA provides tax credits and rebates for projects aimed at reducing energy leakage. Homeowners can now receive up to $4,000 in rebates, covering up to 30% of the cost of insulation improvements, air sealing, and upgrades to doors and windows.

Check the High-Efficiency Electric Home Rebate Program

Keep an eye on the IRA’s new rebate program, expected to launch later this year. The High-Efficiency Electric Home Rebate Program (HEEHRP) will provide rebates to low- and middle-income families who purchase energy-efficient electric appliances. To qualify for a rebate, your family’s total annual income must be less than 150% of the median income where you live.

Invest in Home Solar Panels

Rooftop solar panels allow you to reduce your dependence on traditional energy sources. Under the IRA, the tax credit for solar panel installation increases from 26% to 30% in 2023. This incentive is available to everyone, regardless of income level. By installing solar panels, experts estimate that the average family can save $300 per year on energy costs.

Switch to an Electric Vehicle

The IRA presents a prime opportunity for substantial savings when purchasing or leasing electric vehicles (EVs). Starting in 2023, you can save up to $7,500 on a new electric vehicle or $4,000 on a used one. (Check the eligibility here.) Consider the long-term benefits of EV ownership, especially when coupled with renewable energy sources like solar power. Charging your vehicle at home using clean energy can further reduce your carbon footprint and increase cost-savings.

Next Steps for Maximizing Energy Incentives

Wilke CPAs & Advisors is ready to help small business owners and homeowners achieve their financial goals. Contact us when you’re ready to discuss your unique tax situation and potential cost-saving energy incentives.


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