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Green Provisions of Inflation Reduction Act Present Tax Opportunities for CPAs and their Clients

By:
S.J. Steinhardt
Published Date:
Sep 28, 2022

CPAs should be prepared to advise their clients about forthcoming green energy incentives in the Inflation Reduction Act, in the form, of new, continuing or expanded tax credits, Accounting Today reported.

The legislation contains provisions that need to be codified in rules and regulations, but there are three categories of benefits in the green energy portions, according to Dan Gayer, senior tax manager at Baker Newman Noyes: “the electric vehicle component, the home energy component, and the solar investment and tax credit component," he said.

A qualifying electric vehicle component “will have to be less than $50,000 for cars and $80,000 for trucks and SUVs,” Gayer explained, adding that the there will be income limitations, so it will cut off those making more than $150,000 for individual filers or $300,000 for married couples.

There are additional credits aimed at municipal transit and large delivery trucks, as well as a new credit for used electric vehicles up to $4,000 or 30 percent of the purchase price for used electric vehicles. For this credit, “the income limitation is $75,000 for single taxpayers or $150,000 for married filing jointly," Gayer said. "That's half of the new vehicle limitation, so it's targeted to lower- and middle-income taxpayers.”

The home energy credit regime has been expanded from a $500 lifetime cap to an annual $1,200 cap. The credit is 30 percent of the cost of the qualifying property up to the total annual amount of $1,200, and within that are limits for particular categories.

There are other new programs, such as the High Efficiency Electric Home Rebate Program, which “allows rebates of up to $14,000, much larger than the credit, but it applies to similar things like heat pumps and other energy-efficient improvements,” said Gayer. “It's based on the area median income.”

CPAs must “look at the legislation and be familiar with it," said Deb Rood, risk control consulting director for CNA, the underwriter for the AICPA Professional Liability Insurance program. "The IRA has a lot of green energy provisions, and clients will expect the CPA to tell them about the opportunities.”

These provisions will begin to take effect in 2023.

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