The Inflation Reduction Act is extending the homeowner efficiency tax credit with its new Energy Efficient Home Improvement Credit, previously called the Nonbusiness Energy Property credit. This revised credit is retroactive through December 31, 2022.
How much is the credit?
Previously, the credit was worth 10% of the costs of installing insulation, windows, doors, roofing, and other energy-saving improvements in your residence, with a lifetime limitation of $500.
However, in 2023, the new lifetime limit increases to $1,200 annually. The tax credit will also increase to 30% for costs associated with energy-saving improvements. In addition, the credit has been expanded to include biomass stoves and boilers, electric panels, and home energy audits.
Further Additions and Increases
Homeowners will also be able to claim up to $14,000 in total rebates, including things like:
- $250 for an exterior door or $500 for all exterior doors
- $600 for exterior windows and skylights
- Solar, wind, or geothermal credits have been raised from 26% to 30% from 2022 to 2032. It then falls to 26% for 2033 and 22% for 2034.
- An upfront rebate up to $8,000 may be claimed for installing heat pumps, plus up to $1,750 for heat pump water heaters.
- There is a rebate up to $840 toward the cost of a heat-pump clothes dryer or an electric stove, including induction ranges.
- A rebate, up to $4,000, may be claimed for an electrical panel upgrade to support new electrical appliances.
- A $2,500 rebate can be claimed for electrical wiring improvements.
- Installing energy-efficient insulation and sealing could also get you a rebate up to $1,600.
Who qualifies for the credit?
In order to qualify for any rebates, your household income may not exceed 150% of the area’s median income, calculated by the Department of Housing and Urban Development.
How do I claim the credit?
You can claim the credit on your personal income tax return using Form 5695. Documentation is not required upon submission, but you should keep the documentation in case you get audited. If working with a contractor, the vendor should be able to provide the documentation needed.
It will take time for the Treasury Department to determine fully how the credits may be claimed. In the meantime, work with our tax professionals to ensure what you’re claiming is legitimate.
