Going Green? Here’s What You Need to Know About Energy Tax Credits

You already know about deductions and tracking your income, but are you taking advantage of energy tax credits?

Energy tax credits are basically a way for the federal government to reduce your taxes if you’re actively trying to be more energy-efficient. This could include items such as solar panel purchases, geothermal systems, electric vehicles, and energy-efficient appliances. Why not do good for the earth and get a little something back for it, right?

Plug In and Cash Out: The EV Tax Credit

Thinking of buying an electric vehicle? Guess what? There’s a tax credit for that! You can get back up to $7,500 for a new EV or up to $4,000 for a used one. However, there are a few caveats. First, the EV has to be assembled (at least the final assembly) in North America. Second, you have to meet income limits. These vary depending on your tax status. Factors that can also impact your tax credit include annual income limits, tax status (married or single, for example), and the cost of the vehicle. Set up a strategy session with your tax expert to find out how you can benefit from any EV credit.

Your Home, but Make It Efficient: Energy Upgrade Credit

A more energy-efficient home is everyone’s dream, but it’s expensive to convert your house. The energy-efficient home improvement credit can make it just a bit more affordable. Essentially, you can get up to $3,200 in tax credits per year, depending on the type of improvement. In 2025, you need to purchase only qualified manufacturing products if you want to meet the requirements for the energy upgrade credit and you’ll also need a PIN to report on your tax return.

Home upgrades that improve energy efficiency may include heat pumps, more efficient doors and windows, insulation, biomass stoves and boilers, or central AC panels, among others. Most improvements are capped at $600 per item, with heat pumps and boilers capped at $2,000. You can receive up to 30% of the cost of these improvements in tax credits. To ensure you have what you need to claim the tax credit, set up a meeting with your tax pro. They’ll help you maximize your investment for tax return benefits.

Sunshine & Savings: Solar and Geothermal Credits

Throughout 2025, you can also get 30% of the cost of your solar systems, geothermal heat pumps, wind equipment, or biomass equipment back, without that pesky $3,200 cap. However, this is set to reduce drastically in the coming years. The equipment must also be new and meet specific performance standards. Installing solar panels on a rental home or commercial building, rather than your primary or secondary residence, may require reporting the credit with a separate Internal Revenue Code. Again, your tax pro can guide you through the process.

Use It or Lose It

While these tax credit programs should last until the end of the year, the government is looking at eliminating some of them soon. Much of this is up in the air at the moment, so you need to plan on making any energy-efficient upgrades or purchasing an EV within the next few months to ensure you can take advantage of those tax credits. Take a good look at your total annual income with a tax pro to determine whether any credits would benefit you. Then get to work implementing them before it’s too late!

Wondering how to go about planning for maximum credits? Contact Ask Anna Tax today for more information.