Clean Energy Tax Credits

The IRS recently warned the public about scams involving clean energy tax credits. To avoid falling prey to scammers you must first understand what the scammers are after. Clean energy tax credits are tax incentives for clean electricity that stem from the Inflation Reduction Act. Consumers can claim clean energy tax credits after installing energy-efficient appliances like a solar water heater at their primary residence, but only during the tax year the qualified home improvement item was installed. Clean energy tax credits can also be purchased as an investment but there are strict guidelines on how they can be used.

By allowing corporations and individual investors to buy clean electricity production tax credits and investment tax credits the government is funding their way towards a clean energy economy. When you buy clean energy tax credits they can be used to offset your federal income tax liability but only income tax from a passive activity. This is where the scammers come into play. The IRS has seen taxpayers file returns prepared by unethical individuals claiming clean energy tax credits the taxpayer is unable to benefit from.

To avoid falling victim to the scam, the IRS recommends purchasing clean energy tax credits only under the advice and counsel of a reputable tax professional who understands how these tax incentives work. The rules and restrictions of these tax incentives may evolve in time but, for now, it may be wiser for consumers to claim clean energy tax credits after performing energy-efficient home improvements than it would be to purchase clean energy tax credits.