The IRS recently announced that taxpayers who make energy-efficient upgrades to their homes can benefit from home energy credits. This update, outlined in the IRS announcement (IR 2024-137, 5/9/2024), follows the expansion of credit amounts and qualifying expenses under the Inflation Reduction Act of 2022 (PL 117-169). Here’s what you need to know to maximize your savings.
If you’ve made qualified energy-efficient improvements to your home after January 1, 2023, you might be eligible for a tax credit of up to $3,200. Qualifying improvements include:
- Exterior doors, windows, and skylights
- Insulation and air sealing materials or systems
Additionally, expenses for residential energy properties such as:
- Natural gas, propane, or oil water heaters
- Natural gas, propane, or oil furnaces and hot water boilers
- Heat pumps, water heaters, biomass stoves, and boilers
- Home energy audits of a main home
The maximum credit you can claim annually is structured as follows:
$1,200 for energy property and certain energy-efficient home improvements, with specific limits:
- $250 per exterior door, up to $500 total
- $600 for windows
- $150 for home energy audits
$2,000 for qualified heat pumps, biomass stoves, or biomass boilers
Residential Clean Energy Credit
The Residential Clean Energy Credit allows you to claim 30% of the cost of new, qualified clean energy property installed in your home from 2022 through 2032. Qualified expenses cover:
- Solar electric panels
- Solar water heaters
- Wind turbines
- Geothermal heat pumps
- Fuel cells
- Battery storage technology (beginning in 2023)
To qualify, clean energy equipment must meet the following standards:
- Solar water heaters must be certified by the Solar Rating Certification Corporation.
- Geothermal heat pumps must meet Energy Star requirements.
- 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. Note that this is a nonrefundable credit, meaning the credit amount cannot exceed your total tax liability.
How to Claim Your Credits
To claim these credits, you’ll need to use Form 5695, Residential Energy Credits. Ensure you have all necessary documentation and certification for your energy-efficient improvements to facilitate a smooth filing process.
By making these eco-friendly updates, not only can you reduce your energy bills, but you can also take advantage of significant tax savings. Make sure to explore these credits when planning your home improvements!
For additional details and tax advice, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com