Maximize Your Tax Credits with Energy-Efficient Home Updates
Hey there! The IRS wants to remind everyone that making certain energy-efficient upgrades to your home could qualify you for some great home energy credits. Thanks to the Inflation Reduction Act of 2022, the credit amounts and types of qualifying expenses have been expanded. So, if you’re planning to make energy improvements to your place, you might be eligible for some sweet tax credits.
What You Need to Know
You can claim the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit for the year you make those qualifying updates.
Homeowners will find the most opportunities to claim credits for these improvements, but renters and owners of second homes used as residences can also qualify. However, landlords are out of luck on this one.
Before making any purchases, the IRS recommends checking out all the requirements and qualifications at IRS.gov/homeenergy. For more info, energy.gov compares credit amounts for tax year 2022 and tax years 2023-2032.
Energy Efficient Home Improvement Credit
If you make qualified energy-efficient improvements after January 1, 2023, you might be eligible for a tax credit of up to $3,200. Here’s a quick breakdown:
- 30% Credit on Qualified Expenses:
- Energy Efficiency Improvements: This includes things like exterior doors, windows, skylights, insulation, and air sealing materials or systems.
- Residential Energy Property Expenses: This covers natural gas, propane, or oil water heaters, furnaces, and hot water boilers.
- Other Eligible Equipment: Heat pumps, water heaters, biomass stoves, and boilers.
- Home Energy Audits: Of your main home.
The maximum credit you can claim each year is:
- $1,200 for energy property costs and certain energy-efficient home improvements. There are specific limits on doors ($250 per door and $500 total), windows ($600), and home energy audits ($150).
- $2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers.
Keep in mind, this credit is nonrefundable, meaning you can’t get back more than what you owe in taxes, and any excess credit can’t be carried over to future tax years.
Residential Clean Energy Credit
If you’re investing in clean energy improvements for your main home, such as solar, wind, geothermal, fuel cells, or battery storage, you might qualify for an annual Residential Clean Energy Credit.
- 30% Credit on Qualified Clean Energy Property Costs: This applies to installations made anytime from 2022 through 2032. Qualified expenses include new solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology (starting in 2023).
To qualify, your clean energy equipment must meet specific standards:
- Solar Water Heaters: Must be certified by the Solar Rating Certification Corporation or a comparable entity endorsed by your state.
- Geothermal Heat Pumps: Must meet Energy Star requirements at the time of purchase.
- Battery Storage Technology: Must have a capacity of at least 3 kilowatt-hours.
This credit has no annual or lifetime dollar limit, except for fuel cell property, and it’s nonrefundable. You can carry forward any unused credit to apply against future tax owed.
Filing and Recordkeeping
When it’s time to file your tax return, use Form 5695, Residential Energy Credits, to claim the credit. Remember, you must claim the credit for the year the property is installed, not just purchased.
Keeping good records of your purchases and expenses is essential. This will make it easier to claim the credit when you file your taxes.
For more details on qualifying residences and info for taxpayers who use their home for business, visit IRS.gov.
By making energy-efficient updates, you not only contribute to a greener planet but also potentially lower your tax bill. It’s a win-win!
Get Compliant and Get Tax Relief
Morris and Associates are experts when it comes to helping individuals and companies find tax relief in Georgia but can help no matter where you live or whatever tax questions you have. Contact us to help with your taxes and possibly even reduce the amount that you owe.
