Homeowners Can Save Up to $3,200 Annually on Taxes for Energy Efficient Upgrades

SEE TAX CREDITS FOR HOME BUILDERS

SEE TAX DEDUCTIONS FOR COMMERCIAL BUILDINGS

Claiming Energy Efficiency Home Improvement Credit

– Eligibility: You can claim this credit for improvements to your primary residence in the U.S., which must be an existing home. New builds don’t qualify, and you must live in the home—not rent it out.

– Limits: There are no lifetime dollar limits. You can claim the maximum annual credit each year for eligible improvements until 2032.

– Nonrefundable: This credit won’t exceed your tax liability, and excess credit can’t be carried over to future years.

Claiming the Residential Clean Energy Credit

– Eligibility: Invest in renewable energy (solar, wind, geothermal, fuel cells, or battery storage) for 30% credit on costs for installations from 2022 to 2032. The credit reduces to 26% in 2033 and 22% in 2034.

– Applies to: New or existing primary residences in the U.S. Some improvements on a second home may qualify, except fuel cell claims.

– Carry Forward: You can apply any excess credit to future tax years but can’t include interest paid or loan fees.

Example 1: Home Energy Audit and Insulation Upgrade

A home energy audit identifies areas for improvement and helps prioritize cost-effective energy plumbing and HVAC upgrades. Before replacing your heating and cooling system, improving attic insulation is crucial to reduce air leaks and improve comfort. For tax purposes, you can claim 30% of the audit cost (up to $150) and 30% of the insulation material cost (up to $1,200). If both are done in the same year, the combined credit is capped at $1,200.

Example 2: Heating and Cooling System Replacement

After the audit and insulation upgrades in Example 1, you replace your heating and cooling system with a qualifying air-source heat pump. This qualifies for a 30% tax credit on project costs, up to an additional $2,000. Combined with the $1,200 from Example 1, your total credit for the year is $3,200, the maximum allowed.

Example 3: Window, Door, and Heat Pump Water Heater Upgrades

You replace old windows, two exterior doors, and install a new heat pump water heater. ENERGY STAR Most Efficient windows and doors, along with the heat pump water heater, are eligible for the energy-efficient home improvement credit. You can claim:

• Up to $600 (30% of product cost) for the windows.
• Up to $250 per door (30% of product cost), with a maximum of $500 for two doors.
• Up to $2,000 (30% of project costs) for the heat pump water heater.

Your total credit for these upgrades is $3,100.