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Valor Tax Relief Team
Professional Tax Resolution Specialists
Introduction
If you have been considering home efficiency upgrades, installing solar, or purchasing an electric vehicle, 2025 may be your final full year to capitalize on several generous federal incentives. Multiple credits are slated to sunset after 2025 or late-2025, making timing and eligibility checks essential.
Below, we break down three major credits—the Energy Efficient Home Improvement Credit, the Residential Clean Energy Credit, and the Clean Vehicle Credit—covering who qualifies, what costs count, and how to claim using IRS forms. This guide is written for clarity so you can plan upgrades before deadlines and avoid missing out.
Energy Efficient Home Improvement Credit
For qualifying improvements made in 2023–2025, this credit typically equals 30% of eligible costs. Most upgrades fall under an annual $1,200 cap, while certain heat-related systems can unlock an additional $2,000 limit. The credit is set to end after December 31, 2025. Claim it with Form 5695 (Residential Energy Credits).
Eligible Projects
- Exterior doors (generally up to $250 each; $500 total)
- Windows and skylights
- Insulation and air sealing (subject only to the overall $1,200 cap)
- Central A/Cs, water heaters, furnaces, boilers
- Heat pumps and biomass stoves/boilers (up to an extra $2,000)
- Home energy audits (generally up to $150)
Key Rules
- Labor usually does not count—except installation for heat pumps, certain water heaters, and biomass systems.
- Annual caps reset each tax year; plan multi-year projects accordingly.
- Keep manufacturer certifications and receipts for records.
How to claim: Complete Form 5695 and keep documentation showing equipment eligibility. Coordinate with your tax pro if you’re layering incentives (rebates or utility programs).
Residential Clean Energy Credit
Often called the “solar tax credit,” this incentive equals 30% of qualifying equipment and installation costs for systems such as solar, wind, geothermal, certain biomass fuel, and fuel cells. Unused credit amounts can carry forward. Current rules are scheduled to sunset after 2025. File using Form 5695.
Eligibility Highlights
- Property must be at a home in the U.S. (primary or secondary for solar, wind, geothermal).
- You must own the system (leases and PPAs generally do not qualify).
- Placed in service in 2017 or later, within the credit’s eligible period.
Costs That Typically Qualify
- Equipment and necessary installation labor for eligible systems.
- Some associated balance-of-system components (racking, wiring, inverters).
- Not all ancillary costs qualify—retain detailed invoices.
Tip: If your credit exceeds your tax liability, track the carryforward for next year. Coordinate with any state incentives and utility rebates.
Electric Vehicle Tax Credit
For 2025, buyers may qualify for up to $7,500 on new EVs and up to $4,000 on used EVs that meet program rules. Current guidance indicates this credit ends after September 30, 2025. Claim on Form 8936, or you may transfer the credit to a dealer at purchase for an immediate price reduction.
Vehicle Rules
- MSRP caps: up to $80k for SUVs, vans, pickups; $55k for others.
- Final assembly must be in North America (check VIN resources).
- Used EVs have a $25k price cap and additional age/battery rules.
Taxpayer Income Limits
- New EVs: MAGI limits around $150k (Single/MFS), $225k (HOH), $300k (MFJ).
- Used EVs: limits around $75k (Single/MFS), $112.5k (HOH), $150k (MFJ).
- You may use current-year or prior-year MAGI for qualification.
Practical Tips
- Confirm specific trims and battery components meet rules.
- Document the dealer transfer if taking an immediate discount.
- Keep purchase paperwork and VIN verification.
Eligibility at a Glance
Home Improvement
- 30% credit; most items within $1,200 annual cap.
- Heat pumps/biomass: up to additional $2,000.
- Labor usually excluded except for certain systems.
Clean Energy
- 30% of eligible equipment + install; carryforward allowed.
- Ownership required; leases/PPAs generally ineligible.
- Applies to a home in the U.S.; primary not always required.
EV Credit
- Up to $7,500 new / $4,000 used; ends after Sep 30, 2025.
- Vehicle price caps and assembly/location rules apply.
- Income limits apply; dealer transfer option available.
Conclusion
Energy credits have accelerated adoption of efficient homes, clean power, and EVs. With multiple incentives slated to end after 2025 (and the EV credit ending after September 30, 2025), planning now can help you lock in savings.
If you are considering upgrades, confirm eligibility, map project timelines to the credit deadlines, and file the correct forms. For personalized guidance, our team can help you evaluate options and maximize available incentives.
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