THE NEW AND IMPROVED ENERGY EFFICIENT HOME IMPROVEMENT CREDIT

 

The Inflation Reduction Act of 2022 brought back the credit for energy-efficient purchases for and improvements to a personal residence, which had expired on December 31, 2021, renamed it the Energy Efficient Home Improvement Credit, and enhanced and increased the credit for tax years 2023 through 2032.

For tax years 2023 through 2032 –

* The credit is increased to 30% of eligible costs, which includes the cost of installation.

* The annual limit is increased to $1,200 (with some exceptions discussed below).  There is NO lifetime limit.

* A credit of up to $150 is allowed for a home energy study or audit.

* The annual per item maximum credit limits are:

·         $250 for an exterior door ($500 for more than one door),

·         $600 for exterior windows and skylights, central air conditioners, electric panels and related equipment, natural gas, propane, or oil water heaters, and natural gas, propane or oil furnaces or hot water boilers, and

·         $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves and boilers (here the full $2,000 credit is allowed despite the $1,200 annual limit).
 
* A credit can be claimed for qualifying purchases for and improvements to a second personal residence, such as a vacation home.
 
* Beginning with 2025 returns it appears the manufacturer of an item that qualifies for the credit by meeting the specific energy star requirements must create a “product identification number” for the item and this number must be entered on the claimant’s tax return in order to get the applicable credit. 
 
If you use a tax professional to prepare your returns be aware - you are responsible for determining if your purchase meets all the requirements and qualifies for a tax credit – do not expect your tax pro to do it for you.
 
You can find the specific qualifications for individual items for 2023 and beyond at www.energystar.gov/about/federal_tax_credits/non_business_energy_property_tax_credits.   
 
TTFN