(This article by Col. Curt Sheldon, USAF (Ret), CFP®, EA, originally appeared in the May 2023 issue of Military Officer, a magazine available to all MOAA Premium and Life members. Learn more about the magazine here; learn more about joining MOAA here.)

The Inflation Reduction Act, signed into law in 2022, significantly changed the credits available to you if you decide to go green.

Most changes went into effect Jan. 1. The tax code is complex when it comes to these incentives. Here’s what you should know.

Home Credits

The government will pay you to make energy-efficient changes to your home. Prior to the Inflation Reduction Act, you could only get a credit for energy-efficient upgrades on your primary residence. Now you can claim the credits on a dwelling unit located in the U.S., used by you as a residence, placed in service by you, and you expect to keep and use for at least five years. That means a second home, an RV, or a boat could potentially qualify for the credits.

[RELATED: MOAA's Military State Report Card and Tax Guide]

The new credit, called the “Energy Efficient Home Credit,” is equal to 30% of the amount paid for improvements to the dwelling’s envelope (called “qualified energy efficiency improvements”) plus the amount spent on items like heat pumps and water heaters (called “residential energy property expenditures”).

There is no lifetime limit on the amount of credit you can claim. There are, however, annual limits. Specifically, you are limited to $1,200 a year in credits. If you install windows, skylights, or external doors, there will be further dollar limitations.

Conversely, there is an exception for certain heat pumps, heat pump water heaters, and biomass stoves and boilers. The $1,200 limit does not apply to these items; a separate limit of $2,000 applies. So theoretically, if you install the excepted items, you could get a credit of up to $3,200.

[IRS.GOV: Home Energy Tax Credits]

The Inflation Reduction Act also added a new credit for home energy audits on your principal residence. The audit should identify the most significant and cost-effective energy-efficiency improvement to the dwelling and must be completed by a certified home energy auditor.

The credit is dollar-for-dollar of the amount you spend on the audit up to $150.

Vehicle Credits

The new Clean Vehicle Credit applies to qualifying electric vehicles assembled in North America. Interestingly, this portion of the law went into effect in August 2022. That means if you purchased a vehicle assembled outside of North America after the law went into effect, you won’t get the credit.

The credit calculation also changed. You now can receive up to a $3,750 credit for meeting “critical minerals requirements” and a separate $3,750 credit for meeting the “battery component requirement.” The car dealership should be able to tell you whether the vehicle meets these requirements.

To qualify for the credit, the vehicle can’t be too expensive. Vans, SUVs, and pickup trucks must have an MSRP of less than $80,000. For all other vehicles, the limit is $55,000.

[IRS.GOV: New Clean Vehicle Credit]

You can’t make too much money either. If your modified adjusted gross income exceeds $300,000 for those married and filing jointly, $225,000 for heads of households, or $150,000 for all other filers, you can’t claim the credit. The credit can be transferred to the dealer and used toward the purchase of the car.

Finally, the Inflation Reduction Act added a credit for purchasing used electric vehicles. The credit is 30% of the vehicle’s price or $4,000, whichever is less. You must purchase the vehicle from a dealer, and income limits are half of those for new vehicles. Buyers who can be claimed as dependents do not qualify. The credit also can be advanced and used toward the purchase of the car.

Col. Curt Sheldon, USAF (Ret), CFP®, EA, is a Life Member of MOAA and president of C.L. Sheldon & Company LLC.