Go Green and Save Money:
IRS Announces Expanded Home Energy Tax Credits

The Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit are available for the year in which qualifying expenditures are made. Homeowners who improve their primary residence have the most opportunities to claim these credits, but renters and owners of second homes used as residences may also be eligible. Landlords, however, cannot claim this credit.

To ensure eligibility, the IRS encourages taxpayers to review all requirements and qualifications for energy-efficient equipment at IRS.gov/homeenergy before making any purchases. Additional information is available on energy.gov, where you can compare the credit amounts for tax years 2022 and 2023.

Starting from January 1, 2023, taxpayers making qualified energy-efficient improvements to their homes may qualify for a tax credit of up to $3,200 for the tax year the improvements are made.

The credit equals 30% of certain qualified expenses, including:

• Exterior doors, windows, and skylights

• Insulation and air sealing materials or systems

• Residential energy property expenses (such as central air conditioners, water heaters, furnaces, boilers, heat pumps, biomass stoves and boilers, and home energy audits)

There are maximum credit limits for certain expenses, such as doors, windows, and home energy audits. The credit is available only for qualifying expenditures on existing homes or for additions or renovations of existing homes, not for newly constructed homes. It is important to note that this credit is nonrefundable, meaning it cannot exceed the amount owed in taxes, and any excess credit cannot be carried over to future tax years.

Taxpayers who invest in energy improvements for their main home, including solar, wind, geothermal, fuel cells, or battery storage, may qualify for an annual residential clean energy tax credit. The credit equals 30% of the costs of new, qualified clean energy property installed in a home in the United States from 2022 through 2033. Qualified expenses include the costs of solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology (beginning in 2023).

The Residential Clean Energy Credit has no annual or lifetime dollar limit (except for fuel cell property) and can be claimed each tax year until it begins to phase out in 2033. Similar to the Energy Efficient Home Improvement Credit, this credit is nonrefundable, and excess unused credit can be carried forward and applied to future tax years. To claim the Residential Clean Energy Credit, taxpayers should use Form 5695, Residential Energy Credits, when filing their tax returns. It's important to note that the credit must be claimed for the tax year when the property is installed, not just purchased.

To ensure a smooth process when claiming these tax credits, taxpayers are advised to maintain good records of their purchases and expenses during the time the improvements are made. This will help accurately claim the applicable credits during the tax filing season.

The recent release by the IRS regarding expanded home energy tax credits presents an excellent opportunity for homeowners and renters to make energy-efficient improvements to their homes while enjoying financial benefits. By going green, not only can you save money through these tax credits, but you also contribute to a healthier environment. Take advantage of these incentives and start your journey toward a more sustainable and financially secure future.

For more information on qualifying expenditures and how to claim the credits, visit the official IRS website:
Link to Article: IRS: Going green could help taxpayers qualify for expanded home energy tax credits

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