Gabriel Legorburu

How to Save Money and Energy with the Energy Efficient Home Improvement Credit

If you are looking for ways to lower your energy bills and reduce your carbon footprint, you may want to consider making some energy-efficient improvements to your home. Not only will you enjoy a more comfortable and sustainable living space, but you may also qualify for a generous tax credit from the federal government under the Energy efficient Home Improvement credit.

The Energy Efficient Home Improvement Credit is a new tax incentive that was introduced as part of the Inflation Reduction Act of 2022. It offers a 30% credit for certain qualified expenses related to improving the energy efficiency of your main home. The credit is available for improvements made from Jan. 1, 2023 to Dec. 31, 2032.

In this blog post, we will explain what types of improvements qualify for the credit, how much you can claim, and how to apply for it.

What types of improvements qualify for the credit?

To qualify for the credit, the improvements must meet certain energy efficiency standards and have an expected lifespan of at least 5 years. They must also be new systems and materials, not used.

The qualified expenses include:

Building Envelope Components

These are the parts of your home that separate the interior from the exterior, such as doors, windows, insulation, roofs, and siding. To qualify, they must meet applicable Energy Star requirements. For example, you can claim a credit for installing new exterior doors that reduce air leakage and heat loss.

The credit for building envelope components is limited to $250 per door and $500 total. The credit for windows and skylights is limited to $600 total.

Residential Energy Property Expenses

These are the costs of installing or replacing energy-efficient equipment in your home, such as heat pumps, central air conditioners, water heaters, furnaces, boilers, biomass stoves, and advanced main air circulating fans. To qualify, they must meet certain efficiency criteria set by the Department of Energy or the Environmental Protection Agency. For example, you can claim a credit for installing a heat pump that uses less electricity than a conventional electric heater.

The credit for residential energy property expenses is limited to $1,200 per year.

Home Energy Audits

These are professional assessments of your home’s energy performance and recommendations for improvement. To qualify, they must be performed by a certified home energy auditor or rater. For example, you can claim a credit for hiring an auditor who evaluates your home’s insulation, air sealing, heating and cooling systems, lighting, appliances, and renewable energy sources.

The credit for home energy audits is limited to $150.

How much can you claim?

The maximum credit you can claim each year is:

– $1,200 for energy property costs and certain energy efficient home improvements

– $2,000 per year for qualified heat pumps, biomass stoves or biomass boilers

The credit has no lifetime dollar limit. You can claim the maximum annual credit every year that you make eligible improvements until 2032.

The credit is nonrefundable, which means that you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years.

How do you apply for the credit?

To claim the credit, you will need to file Form 5695 with your federal income tax return. You will also need to keep records of your qualified expenses and proof of their energy efficiency ratings.

You can find more information and instructions on how to fill out Form 5695 on the IRS website: https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit

Conclusion

The Energy Efficient Home Improvement Credit is a great opportunity to save money and energy by making your home more eco-friendly. By investing in qualified improvements, you can enjoy a more comfortable and sustainable living space while reducing your tax liability.

If you need help finding the best HVAC products for your home you can check out some of our reviews listed below:

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