Tax credits available for energy efficient home upgrades
Homeowners who made energy efficient improvements to their property in 2022 could be eligible for tax credits.
Select eco-friendly home upgrades could qualify for one of two federal programs: The energy efficient home improvement credit and the residential clean energy property credit.
"An energy efficient upgrade in your home would be something such as new exterior doors, new windows, a new skylight, energy efficient equipment such as a boiler, central air conditioning," says Alicia Jegede, CPA and founder of the accounting firm New Gen Financial Planning.
There was a $500 lifetime credit limit through Dec. 31, 2022, for the energy efficiency home improvement credit. However, beginning Jan. 1, 2023, the credit increased to an annual credit of up to $3,200 with no lifetime dollar limit. Homeowners can claim the credit for home improvements made through Dec. 31, 2023.
"It's really a more valuable credit going forward," according to Jegede.
The energy efficient home improvement credit only applies to existing homes that are used as a primary residence. Qualified upgrades also include insulation, air sealing materials and home energy audits. New homes and property used solely for business purposes do not qualify for the tax credit.
The residential clean energy property credit is a renewable energy credit that applies to qualified solar, wind, geothermal; and fuel-cell technology.
"That credit is basically a higher dollar amount: 30% of your total qualifying expenditures with no dollar limit. So if you buy solar panels, for instance, if you have solar hot water heating, wind energy, you get 30% of your expenditures. That credit is a really valuable credit," Jegede explains.
Unlike the energy efficient home improvement credit, taxpayers can qualify for the residential clean energy property credit for either upgrades to an existing home or costs incurred on a new home.