Many parts of the country are approaching peak air conditioning season, which often means higher utilities. If your utility bill has recently caught your attention, you may be considering home improvements to lower those bills. Luckily there are tax credits availble that are meant to encourage people to make energy efficient home improvements. With the help of these tax credits, your home improvements can save on your utility bills and even put some money in your pocket.

Eligibility

If you make improvements to your principal or, in some cases, secondary residence, you may be eligible for these credits. In some cases, renters may also be able to claim specific costs. Landlords can’t use these credits for improvements made to any homes they rent out.

There are two tax credits to help offset the costs of making energy efficient improvements:

Energy Efficient Home Improvement Credit

You can claim the Energy Efficient Home Improvement Credit only for improvements, additions or renovations to an existing home. It doesn’t apply to newly constructed homes. Qualifying costs may include:

• Exterior doors, windows, skylights and insulation materials.
• Central air conditioners, water heaters, furnaces, boilers and heat pumps.
• Biomass stoves and boilers.
• Home energy audits.

The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

• 2023 through 2032: 30%, up to a maximum of $1,200 annually.
• Biomass stoves and boilers have a separate annual credit limit of $2,000 annually with no lifetime limit.

Residential Clean Energy Credit

You can also claim the Residential Clean Energy Credit for qualifying costs for either an existing home or a newly constructed home. Qualifying costs may include:

• Solar, wind and geothermal power generation equipment.
• Solar water heaters.
• Fuel cells.
• Battery storage.

The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

• 2022 – 2032: 30%, no annual maximum or lifetime limit.
• 2033: 26%, no annual maximum or lifetime limit.
• 2034: 22%, no annual maximum or lifetime limit.

To claim these credits, you will need to file file Form 5695, Residential Energy Credits, with your tax return.

If you have questions about these credits and whether you qualify, please contact our office. We would be happy to discuss your individual case, and complete your Form 5695 as part of your next tax return.

This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.