By Michael Aston, E.A.
Alhambra Tax Center
Energy Credits
Homeowners who make improvements like replacing old doors and windows, installing solar panels, or upgrading a hot water heater may qualify for home energy tax credits.
Who can claim the credits?
Taxpayers making improvements to their primary, and in some cases secondary, residence 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 costs of making energy efficient improvements.
Energy Efficient Home Improvement Credit
Taxpayers 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; and home energy audits.
The amount of the credit taxpayers can take is a percentage of the total improvement expenses in the year of installation. From 2023 through 2032, the percentage is 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
Taxpayers 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; and battery storage.
The amount of the credit taxpayers can take is a percentage of the total improvement expenses in the year of installation. From 2022 to 2032, the percentage is 30% with no annual maximum or lifetime limit. In 2033, the percentage goes down to 26% with no annual maximum or lifetime limit and in 2034, it goes down again to 22%.
To claim these credits, taxpayers should file Form 5695, Residential Energy Credits, with their tax return.This information is from the IRS Tax Tip 2024-62.
