The §25C nonbusiness energy property credit is extended through tax year 2032 and goes from a lifetime $500 limit to a $1,200 per year limit. The rate increases from 10% to 30%. Roofs will no longer be qualified property, but the credit is now allowed for home energy audits. It is renamed the energy efficient home improvement credit. This change applies to property placed in service after December 31, 2022.

The §25D residential energy efficient property credit, mostly used for solar electric systems, is extended through tax year 2034 and the rate goes back to 30% starting in tax year 2022. It is renamed the residential clean energy credit.

For the existing §30D qualified plug-in vehicle credit, which is mostly in effect through the end of 2022, any vehicle placed in service after August 16, 2022 must have final assembly in North America to qualify. The Department of Energy provided information on this. However, there is a transition rule that if you entered into a contract between January 1, 2022 and August 15, 2022, and receive the vehicle on or after August 16, 2022, a taxpayer can elect to treat it as placed in service on August 15, 2022.

Starting in 2023, the clean vehicle credit and the previously-owned clean vehicle credit are limited based on modified AGI, which is AGI plus the §911, §931, and §933 amounts. The MAGI limitations are cliffs, and a married filing separately taxpayer can claim the credits. In addition, to apply the limit, the taxpayer uses MAGI from the LESSER of MAGI in the year of purchase or MAGI in the year immediately preceding the purchase. This helps to avoid surprise credit qualification problems during the purchase tax year. The MAGI limits are:

• $300,000 (§30D) / $150,000 (§25E) for married filing jointly or surviving spouses.

• $225,000 (§30D) / $112,500 (§25E) for heads of household.

• $150,000 (§30D) / $75,000 (§25E) for all other filing statuses.

Starting in 2024, a taxpayer can elect to transfer their tax credit to their dealer to be applied to the purchase of the car. While this has the potential to be complicated, it will help taxpayers from a cash flow perspective, and taxpayers with lower incomes will avoid credit utilization issues since it is a nonrefundable tax credit.

Starting in 2023, there will be new vehicle price limits: for §30D, it is $55,000 (or $80,000 for pickups, SUVs, and vans). For §25E, it is $25,000 for all cars. On the plus side, the manufacturer limits will no longer apply.

Starting in 2023, the commercial vehicle credit is a great option for a business, especially for a business owned by a higher-income individual, as there are no income limits for this tax credit. The maximum credit amount is $7,500 for vehicles weighing less than 14,000 pounds, and $40,000 for all other vehicles. It qualifies as a business vehicle by being subject to depreciation.