You may be able to claim the Residential Clean Energy Credit and/or the Energy Efficient Home Improvement Credit, if you made certain energy-saving improvements to your residence in the United States.
If you invest in energy improvements for their residence, including solar, wind, geothermal, fuel cells or battery storage, you may qualify for an annual residential clean energy tax credit.
The Residential Clean Energy Credit equals 30 percent of the costs of new, qualified clean energy property for a home in the United States installed anytime from 2022 through 2032. This credit does not have an annual or lifetime dollar limit (except for fuel cell property) but will be phased down to 26 percent and 22 percent for property placed in service in 2033 and 2034.
Qualified expenses are comprised of the costs of new residential clean energy equipment including:
- Solar electric panels;
- Solar water heaters;
- Wind turbines;
- Geothermal heat pumps;
- Fuel cells; and
- Battery storage technology (beginning in 2023).
Clean energy equipment must meet the following standards to qualify for the Residential Clean Energy Credit:
- Solar water heaters must be certified by the Solar Rating Certification Corporation, or a comparable entity endorsed by the applicable state.
- Geothermal heat pumps must meet Energy Star requirements in effect 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, for which the credit is generally capped at $500 per half-kilowatt of capacity, and at $1,667 per half-kilowatt of capacity for homes where more than one person lives.
You can claim this credit every year you place eligible property into service on or after January 1, 2023, and before January 1, 2035 (although with a lower percentage of the cost will be creditable in 2033 and 2034).
The credit is nonrefundable. This means that you cannot get back more from the credit than what you owe in taxes in the year you claim the credit. However, you may carry forward excess unused credit amounts and apply these credit amounts to tax that is owed in future years.
Energy Efficient Home Improvement Credit
If you make qualified energy-efficient improvements to your home after January 1, 2023, you may qualify for a tax credit of up to $3,200.
As part of the Inflation Reduction Act, beginning January 1, 2023, the credit equals up to 30 percent of the cost of the following categories of expenses:
- Qualified energy efficiency improvements installed during the year such as:
- Exterior doors, windows and skylights; and
- Insulation and air sealing materials or systems.
- Residential energy property expenses such as qualified:
- Electric, natural gas, propane, or oil water heaters;
- Electric or natural gas heat pumps or heat pump water heaters;
- Natural gas, propane, or oil furnaces or hot water boilers;
- Electric or natural gas heat pumps;
- Central air conditioners;
- Biomass stoves and boilers; and
- Improvements or replacements of qualifying panelboards, sub-panelboards, branch circuits, or feeders
- Qualified home energy audits of a main home.
The maximum Energy Efficient Home Improvement Credit that you can claim each year is $3,200, but you should note that different categories of expenses are subject to additional credit limits:
- $1,200 for energy property costs and certain energy efficient home improvements, with further 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.
The credit is nonrefundable. This means that you cannot get back more from the credit than what you owe in taxes in the year you claim the credit. You also may not carry any excess credit to future tax years.
