Home energy upgrades can reduce your monthly electric bills, but they don’t always come cheap. Whether you’re interested in solar, energy efficiency, electric cars, or all of the above, there are energy tax credits available in 2020 that will make home energy upgrades easier on your wallet.
Electric car energy tax credits
Electric cars are getting better every year, but they are still a relatively new technology – and one with a higher price tag than comparable gas-powered cars. In recognition of this, federal and state governments offer tax credits to people who buy electric vehicles.
Federal tax credit for electric cars
The Qualified Plug-in Electric Drive Motor Vehicle Tax Credit is the main federal incentive program for electric cars available in the United States. Most electric cars are eligible for this tax credit, which reduces your federal tax burden by $7,500.
This tax credit has a “phase out” built into the program that is dependent on the manufacturer of the car. Once a manufacturer has sold 200,000 eligible electric cars, you won’t be able to use the tax credit when you buy an electric car from that manufacturer.
Based on current sales projections, most electric car manufacturers will still be eligible for this tax credit for 2020. A notable exception is Tesla – the company has reached the threshold where the tax credit has begun to step down. If you’re thinking about buying a Tesla, Chevy Volt or Bolt, or a Nissan Leaf – some of the top-selling electric cars in the U.S. – your safest bet is to buy soon if you want to take advantage of this credit before it completely expires.
State tax credits for electric cars
In addition to the Qualified Plug-in Electric Drive Motor Vehicle Tax Credit, there are plenty of state and local tax credits for electric cars available. This includes credits for buying electric cars as well as for installing electric car chargers at your home or business – check out EnergySage’s list of state and local tax credits for electric cars to see what’s available in your area.
Energy efficiency tax credits
Federal tax credits for energy efficiency expired at the end of 2016, but that doesn’t mean you’re out of luck. Many states offer energy efficiency tax incentives, often in the form of sales or property tax exemptions for purchasing or installing qualifying equipment.
Other financial incentives for energy efficiency
Another common financial incentive for energy efficiency comes from your local utility. Many utilities provide rebates for energy efficient purchases covering a wide range of appliances, building products, electronics, heating and cooling equipment, lighting, fans, pool pumps, and water heaters.
Some rebates are available immediately after purchases, whereas others are available only after installation has been completed. The total rebate amount also depends on the product, going as low as $10 for CFL lightbulbs or up to around $1,000 for larger equipment. You can find available rebates using the Department of Energy’s database of energy efficiency tax credits, rebates and savings.
The solar energy tax credit
One of the biggest energy tax credits available to homeowners and businesses alike in 2020 is the investment tax credit for solar. This credit applies both to solar panel systems and solar hot water systems and is worth 26 percent of the cost of buying and installing a solar system.
Congress extended this credit at the end of 2015, and you have until the end of 2020 to claim the 26 percent benefit. After that, the value reduces by a few percentage points to 22% for 2021. In 2022, it goes away entirely for homeowners and falls to 10 percent for commercial system owners.
The federal tax credit for solar is a major incentive available across the United States, but there are other incentives that may be available to you if you want to install solar, including state tax credits and cash rebates. Use EnergySage’s Solar Calculator to get an idea of the incentives available in your area, along with estimated solar prices and long-term solar savings.