The IRS is encouraging homeowners to take advantage of home energy credits by making energy-efficient upgrades to their properties. These credits, expanded under the Inflation Reduction Act of 2022, offer financial incentives for investments in eco-friendly home improvements.
Here's what you need to know:
Types of Credits: There are two main credits available: the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit.
Eligibility: While homeowners are the primary beneficiaries, renters, and owners of second homes used as residences may also qualify. However, landlords cannot claim these credits.
Reviewing Requirements: Before making any purchases, it's crucial to review the requirements and qualifications on IRS.gov/HomeEnergy. Additional information can be found on energy.gov.
Energy Efficient Home Improvement Credit: This credit, effective from Jan. 1, 2023, allows for a tax credit up to $3,200, equal to 30% of qualified expenses. Eligible improvements include doors, windows, insulation, and energy-efficient equipment like water heaters and furnaces.
Residential Clean Energy Credit: Taxpayers investing in solar, wind, geothermal, fuel cells, or battery storage for their main home may qualify for this credit, equaling 30% of the costs of new, qualified clean energy property installed between 2022 and 2032.
Credit Limits and Refundability: There are annual limits to the amount that can be claimed for each credit, and both credits are nonrefundable. However, any excess credit can be carried forward to future tax years.
Claiming the Credits: To claim the credit, taxpayers should use Form 5695, Residential Energy Credits, for the tax year when the property is installed, not just purchased.
Good Recordkeeping: It's essential to maintain thorough records of purchases and expenses to streamline the process of claiming the credit during tax filing season.
By leveraging these home energy credits, taxpayers can not only save on taxes but also contribute to a more energy-efficient and sustainable future for their homes.
References:
Internal Revenue Service. (2024, May 9). Home improvements could help taxpayers qualify for home energy credits (IR-2024-137). https://www.irs.gov/newsroom/home-improvements-could-help-taxpayers-qualify-for-home-energy-credits-ir-2024-137
