The heat is on…and so are the tax savings


The IRS has advised taxpayers that making specific energy-efficient updates to their homes could qualify them for home energy credits.Modern, energy efficient windows are among the improvements that may qualify for the Energy Efficient Home Improvement Credit.

This guidance comes under the expanded provisions of the Inflation Reduction Act of 2022, aimed at encouraging energy-efficient upgrades.

Big deduction

Taxpayers who installed qualifying energy-efficient improvements such as exterior doors, windows, skylights, insulation, and air sealing systems may benefit from the Energy Efficient Home Improvement Credit. Effective from January 1, 2023, this credit allows for a deduction of 30-percent of the cost of qualified expenses, with a maximum credit of $1,200 for certain improvements and $2,000 for advanced heating technologies annually.

Moreover, the Residential Clean Energy Credit offers incentives for taxpayers who incorporate renewable energy systems into their primary residences, including solar panels, wind turbines, and geothermal heat pumps. This credit equals 30-percent of the installation costs and has no upper limit, barring fuel cell installations, valid through 2032.

Check before you buy

The IRS encouraged homeowners to review all requirements and qualifications at IRS.gov/HomeEnergy before making purchases. Taxpayers were also reminded to keep good records of all purchases and improvements to support their claims during tax filing, using Form 5695, Residential Energy Credits.

Taxpayers can find additional details on energy.gov, comparing the credit amounts for tax years 2023-2032.

FURTHER READING:

Tax credits available for new, energy-efficient homes

Beat the heat with a cool tax break