Home Credits

If you are planning to buy a home 

The Mortgage Interest Credit helps certain individuals afford home ownership. If you qualify, you can claim the credit each year for part of the mortgage interest you pay. 

You’ll need a qualified Mortgage Credit Certificate (MCC) from your state or local government.

If you’ve made your home more energy efficient 

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 that is located in the United States.

The Mortgage Interest Credit helps certain individuals afford home ownership. If you qualify, you can claim the credit each year for part of the mortgage interest you pay.

You’ll need a qualified Mortgage Credit Certificate (MCC) from your state or local government.

The Mortgage Interest Credit helps certain individuals afford home ownership. If you qualify, you can claim the credit each year for part of the mortgage interest you pay.

You’ll need a qualified Mortgage Credit Certificate (MCC) from your state or local government.

Generally, an MCC is issued only with a new mortgage for the purchase of your main home. The MCC will contain important information for calculating the credit, including the certificate credit rate (the percentage of the interest you can claim), and the “certified indebtedness amount” (only the interest on that amount qualifies for the credit).

You must ask the appropriate government agency for an MCC before you get a mortgage and buy your home. Contact your state or local housing finance agency for information about the availability of MCCs in your area.

To claim the credit, complete IRS Form 8396, Mortgage Interest Credit, and attach it to your income tax return.

If you itemize your deductions on IRS Schedule A (Form 1040), Itemized Deductions, you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit allowable for the tax year.

If you paid the mortgage interest to a related person, you can’t claim the credit.

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.

Residential Clean Energy Credit

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.

Keeping good records

Keep full and accurate records to support your credits. Know the cost of your home, or the cost of major improvements to it, or the amounts you’ve taken as deductions on your tax return for use of your home. You’ll also need to use these documents to determine the basis (your original cost/purchase price) or adjusted basis (your cost, plus adjustments such as improvement costs) of your home.

• Keep records that include your purchase contract and settlement papers if you bought the property, or other information that shows you acquired it by gift or inheritance.
• Keep any receipts, canceled checks, and similar records for improvements or other additions to the basis of your home.
  • “Additions to basis” are items that go beyond minor repairs, and add to the value or extend the life of the property.
  • Examples include putting an addition on your home, replacing a roof, repaving a driveway, or rewiring.
• You should also keep track of any decreases to the basis.
  • This includes residential energy credits, D.C. first-time homebuyer credit, allowed or allowable depreciation if you use your home for rental or business activities, payments received for property easements or right-of-way, and insurance reimbursements or tax deductions for casualty losses (fire, flood, etc.).

If you sell your home within nine years, you may have to repay all or part of the benefit you received from the Mortgage Interest Credit program.

You must keep your records for as long as they’re important for meeting any federal tax law requirement. For things like home basis information, this may mean keeping records for as long as you own the property and for a time after it’s sold.

If you refinance your original mortgage loan on which you received an MCC, you must get a new MCC to claim the credit on the new loan. The amount you can claim on the new loan may change.

The Taxpayer Advocate Service is an independent organization within the IRS. TAS helps taxpayers resolve problems with the IRS, makes administrative and legislative recommendations to prevent or correct the problems, and protects taxpayer rights. TAS helps all taxpayers (and their representatives), including individuals, businesses, and exempt organizations. You may be eligible for free TAS help if your IRS problem is causing financial difficulty, if you’ve tried and been unable to resolve your issue with the IRS, or if you believe an IRS system, process, or procedure just isn’t working as it should.  

 TAS has offices in every state, the District of Columbia, and Puerto Rico. To find your local advocate’s number: 

• Visit www.TaxpayerAdvocate.irs.gov/contact-us; 
• Check your local directory; or 
• Call TAS toll-free at 877-777-4778. 

Low Income Taxpayer Clinics (LITCs) assist individuals whose income is below a certain level who need to resolve tax problems with the IRS. They also provide education, outreach, and information on taxpayer rights to individuals who speak English as a second language. LITCs represent taxpayers in disputes before the IRS and courts and help taxpayers respond to IRS notices and correct account problems. Services are offered for free or a small fee. LITCs are independent from the IRS and TAS. For more information or to find an LITC near you, see the LITC Page or Publication 4134, Low Income Taxpayer Clinic List. You can also request Pub. 4134 by calling 800-TAX-FORM (800-829-3676).