Clean Energy Credit for Homeowners
Clean Energy Credit is now available to homeowners. Are you presently thinking about installing solar, doors, windows, or new appliances? In any case, you may be eligible for tax credits.
Thanks to the Inflation Reduction Act of 2022, homeowners can now benefit from two tax credits. These are the Energy Efficient Home Improvement Credit, and the Residential Clean Energy Property Credit.
This article covers:
- Energy Efficient Home Improvement Credit for homeowners
- Residential Clean Energy Property Credit for homeowners
- What is the Inflation Reduction Act of 2022? What changed?
- More Inflation Reduction Act programs
NOTE: Both of these credits are nonrefundable. This means that the credits can only decrease your tax liability. Consequently, you will not receive a tax refund for any amount that exceeds your tax liability. In addition, you are eligible for these credits even if you are subject to the Alternative Minimum Tax.
Energy Efficient Home Improvement Credit
The Energy Efficient Home Improvement Credit provides a 30% tax credit. This is a credit toward costs of energy efficiency improvements, certain appliances, and home energy audits. This credit will expire after 2032.
The Energy Efficient Home Improvement Credit covers:
- Exterior Doors. Maximum $250 per door, maximum $500.
- Exterior Windows and Skylights. Maximum $600.
- Insulation or Air Sealing Materials and Systems. No maximum.
- Home Energy Audits. Maximum $150. Read more about Home Energy Audits.
- New Appliances, plus Labor. Maximum $600 per appliance. Appliances include central air conditioners, water heaters, furnaces, and hot water boilers.
- Electrical Upgrades. Items include panelboards, sub-panelboards, branch circuits, or feeders that are installed along with building envelope components. In addition, they must have a minimum load capacity of 200 amps.
- Heat Pump Water Heaters, Heat Pumps, Biomass Stoves and Boilers. For this purpose, check the CEE Directory of Efficient Equipment for a database of qualifying equipment.
Maximum credit amounts
Keep in mind that there is a $1,200 maximum annual credit for most of the above items. The last item on the list, heat pump water heaters, heat pumps, and biomass stoves and boilers, have a separate maximum of $2,000. As a result, the maximum total credit amount may be up to $3,200.
Residential Clean Energy Property Credit – 30% federal tax credit for Solar
The Residential Clean Energy Property Credit covers:
- Solar Panels
- Solar Water Heaters
- Fuel Cells
- Wind Turbines
- Geothermal Heat Pumps
- Battery Storage Technology with a capacity of at least three kilowatt hours (kWh).
Before, the 30% also applied to roof repairs that were a part of solar installations. Presently, the IRS states that roofing materials are no longer included in calculating the 30% credit.
Maximum credit amounts
Finally, there is generally no maximum limit for the Residential Clean Energy Property Credit. However, one exception to this is fuel cells. In this situation, there is a maximum $500 for each half kilowatt of capacity.
The Inflation Reduction Act of 2022
On August 16, 2022, lawmakers passed the Inflation Reduction Act. Overall, the purpose of the Act is to promote clean energy. In particular, the programs aim to make homes more energy efficient.
In addition, the bill will reduce U.S. greenhouse gas emissions about 40% below 2005 levels, by 2030.
Before 2023, the Energy Efficient Home Improvement Credit was a $500 lifetime credit. In contrast, there is now a maximum annual credit of generally up to $1,200.
In addition, the Inflation Reduction Act renamed the Residential Energy Efficient Property Credit. It’s now the Residential Clean Energy Credit. Previously, the Residential Energy Efficient Property Credit was smaller. Before, it was worth 23% in 2023, and then set to expire in 2024. Presently, the new Residential Clean Energy Credit is 30% through 2032, and will expire in 2034.
Finally, the Residential Clean Energy Credit no longer includes biomass furnaces and water heaters. On the other hand, it now includes battery storage technology.
More Inflation Reduction Act Programs
More information on the Inflation Reduction Act is on the White House’s Clean Energy website. In addition, you can read the full text of the Inflation Reduction Act.
In addition to home energy programs, there are also credits for electric vehicles.
As always, contact me for more information.