President Biden signed the Inflation Reduction Act into law on August 16. The massive climate, energy, tax, and healthcare package contains numerous clean energy incentives including tax credits for the purchase of new and used electric vehicles. But you may not have heard that the new law also revives the tax credit for electric vehicle charging stations and equipment that had expired in 2021. There are some changes to the prior charging station tax credit that you will want to be aware of, so that you can potentially use the tax break for your own EV charger.
What is the Tax Write Off for EV Chargers?
The federal tax credit for electric vehicle chargers originally expired on December 31, 2021. However, the Inflation Reduction Act’s Alternative Fuel Refueling Property tax credit extends the EV charger tax incentive ten years—through December 31, 2032.
So, what does that mean for you? Essentially, if you install a home EV charging station, the tax credit under the Inflation Reduction Act is 30% of the cost of hardware and installation, up to $1,000. Also, beginning in 2023, the tax credit for business and home installations, will apply to other EV charging equipment like bidirectional (i.e., two-way) chargers.
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Businesses that that install new EV chargers or EV charging equipment can also benefit from a tax incentive of up to 30% of the total cost of equipment and installation. But they will have to meet certain labor and construction requirements to be eligible to claim the full incentive.
Before the Inflation Reduction Act, the limit on the amount of the EV charger tax credit for businesses was $30,000 (which still applies to projects completed before the end of 2022). However, under the new law, if you complete the business installation project after 2022, the tax credit per property item, is up to $100,000 per EV charger.
All of this means that while electric vehicle chargers are not entirely tax deductible, you might benefit, to some degree, from the tax incentives in the Inflation Reduction Act that apply for refueling property.
[Yours free, download The Kiplinger Tax Letter (opens in new tab) August 18 issue for more details on how the Inflation Reduction Act will affect you, your clients, or your business.]
Biden’s EV Charging Investment Plan
The EV charger tax credit is revived just as President Biden on September 14 announced a $900 billion EV charging station investment plan. The plan, which also comes as the Inflation Reduction Act provides tax incentives for new and used electric vehicles, is to build 100 million EV charging stations in thirty-five states. The Biden administration has indicated that the approved investment will span 53,000 miles of national highway.
The massive investment in EV charging stations stems from the Bipartisan Infrastructure Law (signed last year) that the White House says, “invests $7.5 billion to build a national network of EV chargers so that charging EVs is predictable, reliable and accessible.”
Can Solar Panels Be Used for EV Charging?
In a related addition to the EV charger tax credit, the Inflation Reduction Act also provides incentives for installation of home solar panels with the Residential Clean Energy tax credit. For home and residential solar product installations, the Inflation Reduction Act allows a nonrefundable tax credit of up to 30% of the total cost.
That 30% tax credit is based on eligible expenses like solar panels, power cells, labor, permitting and developer fees, other necessary related solar equipment, batteries, and inspection costs.
In its current form, the solar energy tax credit in the Inflation Reduction Act applies for the next ten years—through December 2032. And the credit is available for the year in which you complete the solar installation.
The tax credit that applies to solar panels can be beneficial on its own, of course. But it also has potential positive implications for people interested in using solar panels to charge their electric vehicles. That’s because if you’re eligible for the tax breaks for both home and residential solar and EV charging stations and equipment, you could reap the benefits of two significant clean energy tax incentives in the new law.
And if you’re even luckier, you could be one of the consumers who is eligible next year to claim the Inflation Reduction Act’s tax credit for new and used electric vehicles.
For more information from Kiplinger about taxes and the Inflation Reduction Act, see:
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