The information in this article is up to date through tax year 2023 (tax returns filed in 2024).
There are several reasons to make your home more energy-efficient. You can reduce your carbon footprint, save on utilities, and qualify for a tax incentive. Keep reading to learn how you can get a tax credit for energy-efficient home improvements.
What tax credits are available for completing energy-efficient home projects?
The Inflation Reduction Act overhauled and expanded upon several tax credits meant for energy-efficient home improvements. These tax credits have specific requirements for those thinking of completing energy-efficient home improvements. Learn more about these credits and see if you qualify to claim them below.
Residential Clean Energy Credit
The new Residential Clean Energy Credit (formerly known as the Residential Energy Efficient Property Credit) applies to new installations and upgrades to renewable energy systems (in both new builds and existing homes). The following energy-efficient installations qualify for the credit:
- Qualifying solar electric systems
- Solar water heating systems
- Small wind energy systems
- Geothermal heat pumps
- Qualifying fuel cells
- Battery storage technology (new for 2024)
The Residential Clean Energy Credit is worth up to $1,200 annually (or 30% of the costs of eligible home improvements) for qualifying home improvements completed on your primary residence only. The credit is nonrefundable, but any unused amount can be carried forward if you decide to do more energy-efficient upgrades in future years. There is no AGI limitation on this credit and the amount of the credit is not capped, except on fuel cells which is limited to $500 for each half kilowatt of capacity of the property.
Energy Efficient Home Improvement Credit
There is another new credit for energy-efficient home upgrades called the Energy Efficient Home Improvement Credit (formerly known as the Nonbusiness Energy Property Credit). This credit is equal to 30% of the total amount paid for qualified energy-efficiency property improvements (up to $1,200 per year). There are limits on how much you can claim on your primary residence depending on the following types of improvements:
- $600 for any single energy-efficient appliance such as advanced main air circulating fans, central air conditioning, hot water heaters, furnaces, electric heat pump water heaters fueled by gas, propane, or oil, insulation materials, or metal or asphalt heating.
- $600 for windows and skylights
- $500 for exterior doors ($250 per door)
- $150 for energy audits
You can also claim up to $2,000 for heat pumps, air source heat pumps, biomass stoves, and furnaces. If you have both types of energy-efficient-related expenses, you can claim up to $3,200 per year on qualifying home improvements.
You are eligible to claim the Energy Efficient Home Improvement Credit if you are making qualifying home improvements on your primary residence, not installations on a new build. This credit is nonrefundable and cannot be carried over to future years.
For more information about the requirements for these tax credits, check out this article.
Can I get tax credits for home improvements?
If you made energy-saving improvements to your primary home during the tax year, you could qualify for the residential renewable energy tax credit. The system can be installed on a new build or an existing home. Renewable energy systems that qualify for the credit include:
- solar electric systems (solar panels)
- solar water heaters (not used for swimming pools or hot tubs)
- geothermal heat pumps
- small wind turbines
- fuel cells
How much is the tax credit for renewable energy improvements?
Under the new Residential Clean Energy Credit, you could receive a tax credit worth up to 30% (or $1,200 per year) of the cost of eligible energy-efficient home upgrades for your primary residence purchased between January 1, 2023, and December 31, 2032. After that, the credit percentage decreases to 26% for 2033, then 22% for 2034. The credit will no longer be available after December 31, 2034.
How do I claim energy-efficient tax credits?
You can claim the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit using IRS Form 5695. TaxSlayer makes it easy to see what credits you qualify for and claim them. Get started now!
Can I write off my smart thermostat and energy-efficient appliances (dishwasher, refrigerator, etc.)?
While these appliances can reduce your energy and water consumption and save you money on utilities, there is no tax credit for these kinds of in-home purchases. The credit applies to alternative energy equipment such as solar panels and geothermal heat pumps. See above for the complete list of systems that do qualify.
Can I get a tax credit for buying an electric car?
There is a tax credit for certain qualifying electric vehicles. The Clean Vehicle Tax Credit is worth up to $7,500 in non-refundable credit for new vehicles, or $4,000 for used vehicles.
For more information on the standards used to qualify products as “energy-efficient,” visit wws.irs.gov or www.energystar.gov.
