Under the Inflation Reduction Act, homeowners may be eligible for several new tax credits if they make certain energy efficiency upgrades to their homes. These credits are already in place, and can be claimed on your 2023 tax returns. 

Efficiency Home Improvement Credit

The IRA modifies section 25C of the federal tax code, allowing homeowners who make certain efficiency upgrades (insulation, heating equipment, etc.) after 2022 to claim up to $1,200 or 30% of the project costs in their tax returns. If a heat pump is included in those upgrades, the number increases to $2,000. Another $600 is available for electrical panel upgrades, and $150 is available for a home energy assessment. This credit can be claimed each year, as long as homeowners continue to make eligible improvements to their property.

See the FAQs below for a full list of eligible improvements.

 

Residential Tax Credits for Solar, Geothermal, and Fuel Cells.

Under section 25D, homeowners can claim up to 30 percent of the costs of solar, geothermal systems or fuel cell installation on their tax returns. This credit can be claimed separately or on top of other efficiency upgrades.

Energy-Efficient Home Tax Credit

The IRA expands Section 45L, providing $2,500 for homes meeting certain ENERGY STAR standards and $5,000 for certified DOE Zero Energy Ready Homes.

FAQ

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The following energy efficient home improvements are eligible for the Energy Efficient Home Improvement Credit:  

• Building envelope components satisfying the energy efficiency requirements in Q1 under the Energy Efficiency Requirements section:

  1.   Exterior doors (30% of costs up to $250 per door, up to a total of $500);
  2.   Exterior windows and skylights (30% of costs up to $600); and
  3.   Insulation materials or systems and air sealing materials or systems (30% of costs).

• Home energy audits (30% of costs up to $150)

• Residential energy property (30% of costs, including labor, up to $600 for each item) satisfying the energy efficiency requirements in Q1 under the Energy Efficiency Requirements section:

  1.  Central air conditioners;  natural gas, propane, or oil water heaters;
  2.  Natural gas, propane, or oil furnaces and hot water boilers; 
  3.  Improvements to or replacements of panelboards, sub-panelboards, branch circuits, or feeders that are installed along with building envelope components or other energy property listed in these FAQs and enable its installation and use.

• Heat pumps and biomass stoves and biomass boilers (30% of costs, including labor) satisfying the energy efficiency requirements in Q1 under the Energy Efficiency Requirements section:

  1.  Electric or natural gas heat pump water heaters;
  2.  Electric or natural gas heat pumps; and
  3.  Biomass stoves and biomass boilers. 

 

This information is subject to change, and is ultimately determined by the IRS. Please visit https://www.irs.gov/inflation-reduction-act-of-2022 for more information.