Thinking of making your home more energy-efficient? Now’s a great time to take action and benefit from substantial tax credits offered under the Inflation Reduction Act of 2022. From upgrading your heating systems to installing renewable energy solutions, here’s how you can reduce costs and improve your home’s efficiency while securing valuable tax benefits.
Upgrades That Qualify for Tax Credits:
Energy Efficient Home Improvement Credit:
- Qualifying Improvements: Windows, doors, skylights, insulation, air sealing, certain heating and cooling systems.
- Credit Details: Gain a tax credit of 30% of the cost with a maximum annual credit of: 1) $1,200 for most energy property costs, including a cap of $250 per door (up to $500 total) and $600 for windows, 2) $150 for home energy audits, and 3) $2,000 specifically for advanced main air circulating fans, heat pumps, biomass stoves, and boilers.
- Nature of Credit: This is a nonrefundable credit, meaning you can’t receive more in credits than you owe in federal taxes, and it doesn’t carry over to future tax years.
Residential Clean Energy Credit:
- Qualifying Technologies: Solar panels, solar water heating, wind turbines, geothermal heat pumps, fuel cells, and, starting in 2023, battery storage technology.
- Credit Details: Offers a 30% credit on the total cost of new installations with no annual or lifetime dollar limit, except for fuel cells.
- Nature of Credit: Nonrefundable but unique in that any unused portion of the credit can be carried forward to future tax years, allowing for ongoing tax savings until 2032.
Eligibility and Claiming the Credit:
- Who Can Claim: These credits are available to homeowners, renters, and second-home owners. Unfortunately, landlords are not eligible.
- Documentation and Compliance: Prior to making upgrades, verify specific requirements at IRS.gov/homeenergy. Keep detailed records of all expenses as they will help you claim the credits effectively on Form 5695 during tax filing.
Don’t miss this opportunity to enhance your home’s efficiency, save on operational costs, and lower your tax bill. Check outenergy.gov for comparisons of how much you can save with these credits before and after the Inflation Reduction Act. Start planning your energy-efficient upgrades today to take full advantage of these compelling tax incentives.
