With energy costs on the rise and a growing focus on sustainability, now is the perfect time to think about making your home more energy-efficient. Not only will this help reduce utility bills, but you can also take advantage of some valuable tax credits the federal government offers. Taxpayers who make energy improvements to their primary residence, whether that be a rental or secondary home used as a residence, may be eligible for home energy tax credits. I want to highlight two key credits that could save you a significant amount of money: the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit.
- Energy Efficient Home Improvement Credit
If you’ve been thinking about upgrading your home to be more energy-efficient, this credit may be for you. This credit allows taxpayers to claim 30% of the cost of certain energy-efficient improvements, up to $3,200 per year. However, the maximum credit for certain items may vary, for example, windows and doors have individual caps.
Eligible improvements:
- Insulation and air sealing materials or systems
- Energy-efficient windows and exterior doors
- Natural gas, propane, or oil water heaters
- Heat pumps, water heaters, biomass stoves and boilers
- Home energy audits of a main home
Maximum credit per year:
- $1,200 for energy property costs and energy efficient home improvements with limits on doors ($250 per door, $500 total), windows ($600), and home energy audits ($150).
- $2,000 per year for qualified heat pumps, biomass stoves, or boilers.
- Residential Clean Energy Credit
For those interested in renewable energy sources, this credit provides a significant incentive to invest in clean energy systems for your home. The Residential Clean Energy Credit offers a 30% tax credit on the cost of installing qualified renewable energy systems with no annual cap on the credit amount.
Eligible Clean Energy Systems:
- Solar Panels
- Solar Water Heaters – must be certified by the Solar Rating Certification Corporation.
- Wind Turbines
- Geothermal Heat Pumps – must meet Energy Star requirements in effect at the time of purchase.
- Fuel Cells
- Battery Storage – must have a capacity of at least 3 kilowatt hours.
If you’re planning to make any home improvements this year, these tax credits are a great way to offset some of the costs. Plus, you’ll be investing in a more energy-efficient, environmentally friendly home. You don’t have to choose between these credits – you can use both! To claim these credits, you’ll need to use IRS Form 5695 when filing your taxes. If you’re not sure where to start or how to make the most of these credits, feel free to reach out to us for more information.
Brooke Bender, Audit & Tax Associate at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our tax professionals, please contact our office at 781-453-8700.