President Joe Biden signed the Inflation Reduction Act (IRA) of 2022 into law on August 16, 2022. The bill includes numerous investments in climate protection, including tax credits for households to reduce energy costs, and investment in clean energy production to reduce carbon emissions. Here are some incentives which can benefit individual taxpayers who are planning to purchase electric vehicles and install solar PV system on their residence.

Solar Investment Tax Credit: The federal government has incentivized homeowners to switch to solar through the solar investment tax credit (ITC), also known as the federal solar tax credit. The rate of this credit has fluctuated over the years. The IRA included an extension of the ITC. Starting on January 1, 2023, homeowners can now claim 30% of their total solar photovoltaic (PV) system installation costs as a deduction on their federal taxes. The ITC will decrease to 26% in 2033 and drop to 22% in 2034.

The ITC is available for solar customers throughout the United States. However, specific qualifications must be met to take advantage of the tax credit; (1) Solar PV system must be in place by the end of a year  to qualify for 30% deduction on the same year tax return, (2) The solar PV system must be new or being used for the first time during the specific year, (3) you must own the solar PV system. You cannot claim the tax credit if you lease your system or agree to Power purchase agreement, and (4) the solar PV system must be located at your primary residence or secondary home in the United States.

EV tax credit: The federal government has provided EV tax credits up to $7,500 to consumers who purchased battery electric vehicles through Qualified Plug-in Electric Drive Motor Vehicle Credit since 2010. The IRA amended the EV tax credit, which includes an extension of the credit with new assembly requirements. In addition, it provides a reduced $4,000 credit to taxpayers who purchase used EVs. If the taxpayer entered into a written binding contract to purchase a new qualifying electric vehicle and did not take possession of EVs before August 16, 2022, the taxpayer may claim the EV credit based on the rules before amendment.  If the taxpayer purchases and takes possession of an electric vehicle between August 16, 2022 and December 31, 2022, the vehicle must be assembled in North America.  To be qualified for the EV tax credit from January 1, 2023, battery components should be assembled and made of critical minerals which are extracted, processed, or recycled in North America. In addition, the percentage of the value of the battery’s components that were manufactured or assembled in North America has to exceed a certain threshold.

In addition to EV federal tax credit, California residents can apply for Clean Vehicle Rebate Program (CVRP) and get up to $7,000 to purchase or lease a new plug-in hybrid electric vehicle, battery electric vehicle, or a fuel cell electric vehicle.