Home Energy Tax Credits
If you have made or plan on making energy efficiency improvements to your home, tax credits are available for a portion of qualifying expenses. The credit amounts and types of qualifying expenditures were expanded by the Inflation Reduction Act of 2022. If you have already made energy improvements to your home in 2024, they may qualify for this tax year. If you haven't but want to take advantage of the credits in 2024, you should start inquiring about projects now.
Homeowners who improve their primary residence have the most opportunities to claim credit. Those renting and owning secondary homes can also take advantage of some tax credits. For questions related to residential qualifications, please refer to the following website: Frequently asked questions about energy-efficient home improvements and residential clean energy property credits - Qualifying residence | Internal Revenue Service (irs.gov)
Projects that qualify for the Energy Efficient Home Improvement Credit include improvements to the residence's envelope, such as exterior doors, windows, and insulation materials. Heating and cooling systems may also qualify if they are efficient or are heat pumps. Home energy audits are also eligible and might be a good starting point for those looking to make energy-efficient improvements.
The amount of tax credit varies based on the type of project. Most projects are eligible for a 30% tax credit up to a certain amount. For example, if a homeowner chooses to install a heat pump, a taxpayer would be eligible for a 30% tax credit of up to $2,000. If a taxpayer decides to install new energy-efficient windows, they will qualify for a 30% tax credit of up to $600. Further information about the varying amounts and projects that qualify can be found at Making Our Homes More Efficient: Clean Energy Tax Credits for Consumers | Department of Energy.
It is important to remember that this is a tax credit, not a deduction. Homeowners should save all documentation, including energy efficiency ratings of the products and receipts. For the project to apply to a homeowner's 2024 federal taxes, the project must be installed by December 31, 2024. Homeowners should keep this in mind as in some instances, such as windows and doors, they may need to be ordered and installed, which could take weeks or even longer.
If you have not completed any energy efficiency improvements this year and the projects are not possible by the end of the year, homeowners can take advantage of the tax credit program through 2032. Homeowners should use the extended duration to plan home improvements as there is an annual cap to the credits based on the type of project. The IRS has published the Frequently Asked Questions about energy-efficient home improvements and residential clean energy property credits (irs.gov), a nine-page factsheet that answers most questions and provides examples.
