Home Energy Efficiency Improvements Tax Rebates
Apr 02, 2024
Tax credits for energy-efficient home improvements are extended and expanded by the Inflation Reduction Act.
Energy Efficient Improvements Tax Rebates
According to an article in Kiplinger, “If you’re planning a few home improvements that will boost the energy efficiency of your house, you may save some money on your projects under the Inflation Reduction Act, which was signed into law in August. While the new law primarily helps businesses adopt more eco-friendly measures, there are incentives for homeowners to save some green, too.”
“Homeowners can cut their tax bill if they install new energy-efficient windows, doors, water heaters, furnaces, air conditioners, and the like. That’s because the legislation extends and enhances two tax credits that reward “green” upgrades to your home. There are also new tax breaks for the purchase of electric vehicles and a revived tax break for installing EV recharging equipment at home. Low- and moderate-income families may also qualify for rebates if they purchase energy-efficient appliances. With these changes, it’s a little easier for American homeowners to save some green and be green.”
The Biden administration has created a website to help you determine which home improvements will qualify for the tax credits and rebates.
The new law extends through 2023 an existing program that allows homeowners to claim a credit on their federal tax returns of 30 percent off improvements to home energy efficiency, such as windows and insulation. Buyers can claim up to $600 per purchase for up to $1,200 in 2023. Your tax returns must include the Energy Star Most Efficient certification to qualify for the tax credits.
Homeowners can also claim a $150 tax credit for a home energy audit.
Getting the Savings Now. The 2022 Window & Door Tax Credit.
Current federal tax credits for specific energy-efficient improvements to existing homes are available if you purchased and installed a qualifying product in 2022. Equipment and materials can qualify for the Nonbusiness Energy Property Credit only if they meet the standards set by the Department of Energy. The manufacturer of the product can tell you whether a particular item meets those standards.
For this credit, the IRS distinguishes between two kinds of upgrades.
The first is “qualified energy efficiency improvements,” and it includes:
- Home insulation
- Exterior doors
- Exterior windows and skylights
- Certain roofing materials
The second category is “residential energy property costs.” It includes:
- Electric heat pumps
- Electric heat pump water heaters
- Central air conditioning systems
- Natural gas, propane, or oil water heaters
- Stoves that use biomass fuel
- Natural gas, propane, or oil furnaces
- Natural gas, propane, or oil hot water boilers
- Advanced circulating fans for natural gas, propane, or oil furnaces
You can claim a tax credit for 10% of the cost of “qualified energy efficiency improvements” and 100% of “residential energy property costs.” This credit is worth a maximum of $500 for all years combined, from 2006 to its expiration. Of that combined $500 limit,
- A maximum of $200 can be for windows.
- The maximum tax credit for a furnace circulating fan is $50.
- The maximum credit for a furnace or boiler is $150.
- The maximum credit for any other single residential energy property cost is $300.
How to Qualify for the Energy Efficient Improvements Tax Rebates / Credit:*
Purchase and install qualifying windows or patio doors that meet ENERGY STAR® Windows Program version 6.0 performance requirements beginning January 1, 2022, through December 31, 2022.- Save your sales receipt, a copy of the Manufacturer’s Certification Statement, your product labels, or a product performance (NFRC Ratings/ ENERGY STAR Qualification) sheet with your tax documents.
– Download the applicable Manufacturer’s Certification Statement for your products.**
– Save your product performance labels from your window(s) or door(s) or take a photo of the labels on your windows(s) and door(s) and keep it with your tax documents. You can also download the Product Performance NFRC Ratings/ ENERGY STAR version 6.0 Qualifications Sheet applicable to your product. This document shows you which products meet ENERGY STAR version 6.0 performance criteria for your area (last page of the PDF). - Claim the tax credit associated with your qualifying purchase and installation on your Federal filing for the applicable tax year. Your tax preparer or most tax preparation software can assist with the necessary IRS form 5695.
Limitations
- Tax credit is for the cost of the product only. The credit does not include installation costs
- Tax credit is 10% of the amount paid up to the maximums listed below***
- $500 total maximum lifetime tax credit for any improvements, including other eligible items as listed in Section 25C of the Internal Revenue Code
- $200 total maximum tax credit for qualifying windows and skylights
- $500 total maximum tax credit for all qualifying improvements, including windows or skylights
- If combinations of windows, skylights, and doors are purchased, then the total maximum credit is $500, of which $200 is the maximum allowable for windows and skylights
- The tax credit is an extension of the 26 USC §25C tax credit, which means all previous federal tax credits are a maximum lifetime credit. A homeowner who has already claimed the maximum applicable tax credits permitted under 26 USC §25C in previous tax years is no longer eligible for this tax credit
Increase joy and save money.
We know there are always plenty of home renovation projects you could take on. But home window replacement checks all the boxes — it’s a great way to increase your home’s future selling price, it will lower your monthly home energy bills, and it can add life and finesse to your day-to-day enjoyment of your home.
Updating your windows, doors, and siding increases your home’s curb appeal and helps reduce your energy bills and you may qualify for Energy Efficient Improvements Tax Rebates. Make your home more energy-efficient and reduce harmful rays. With a wide variety of colors and styles, McCann Window & Exteriors will guide you to find the perfect fit for your home.
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Disclaimers
* This is a summary of the tax credit elements related to windows and doors as outlined in Section 25C of the Internal Revenue Code as modified by the Inflation Reduction Act of 2022, Public Law No. 117-169, which the President signed on August 16, 2022, which among other things, extends the current tax credits in Section 25C of the Internal Revenue Code on eligible property purchased and installed through December 31, 2022.
**McCann Window & Exteriors bears no responsibility for determining whether a particular purchase or application qualifies for the tax credit. McCann Window & Exteriors does not intend to and is not providing legal or tax advice and recommends that purchasers consult their tax advisor or the IRS to determine whether the products they purchase for a particular application qualify for the tax credit.
As the ENERGY STAR version 6.0 criteria differ by climate zone, please review the ENERGY STAR requirements in the climate zone where the product will be installed and refer to the respective product NFRC Ratings/ ENERGY STAR version 6.0 Qualifications sheet to select the product. Please consult your tax planner and review all IRS guidelines. McCann Window & Exteriors is not a tax advisor.
*** These credits include the aggregate of all current and prior taxable years and cannot exceed the maximums listed for any taxpayer.
Sources:
https://www.whitehouse.gov/cleanenergy
https://www.energystar.gov/about/federal_tax_credits
https://www.nytimes.com/by/coral-davenport, “How the New Climate Law Can Save You Thousands of Dollars”
