Designing your home
A Homeowner’s Guide to Claiming Clean Energy Tax Credits
A current topic for discussion across many households is the use of renewable energy alternatives and sustainable appliances to reduce our carbon footprints. As a nation, it is vital to consider employing environmentally friendly home inclusions as we all play a part in improving the world for future generations.
Even the federal government recognizes this, following the introduction of new policies to the Inflation Reduction Act that rewards homeowners with a tax credit for employing energy-efficient practices into homes. Not only is this a responsible environmental choice for homeowners but it is also an economically responsible one. As we move towards cleaner energy sources, choosing efficient appliances can play a part in reducing household energy bills for years to come.
But what are the eligibility requirements for these tax credits? And how can you access them? In this article, our home experts will delve into the tax credit plan, if you can access it and how to apply for the tax credit itself. Let’s get started:
What are clean energy tax credits?
The clean energy tax credits provide taxpayers with money back as an incentive for homeowners to install energy-efficient solutions as we move towards a clean energy future. Simply claim this credit on your annual tax return to reduce the federal taxes commonly paid as a homeowner.
There are two different credit options available under the residential section: the Energy Efficient Home Improvement Credit and the Residential Energy Property Credit.
What products are eligible for energy tax credits?
There are a variety of home improvement products available for the tax credit including:
- Solar panels
- Biomass stoves
- Central air conditioners
- Water heaters and coolers
- Geothermal heat pumps
- Wind turbines
- Home backup power storage
- Electric or natural gas heat pumps
- Solar water heating products
- Oil furnaces and hot water boilers
- Panelboards, sub-panelboards, branch circuits or feeders
Alternatively, a range of energy suppliers offer rebates on certain appliances. The Energy Star website has a rebate finder that locates based on your ZIP code the rebates available currently. Some home improvements and energy-efficient solutions are eligible for both the rebate and the tax credit.
What qualifies for the energy tax credit?
There is a range of home improvement components that can be claimed through the energy tax credit initiative. These are detailed in the table below:
Energy Efficient Home Improvement Credit:
|Building Envelope Components|
|Exterior doors||30% of costs up to $250 per door & a total of $500|
|Exterior windows & skylights||30% of costs up to $600|
|Insulation Materials/Systems & Air Sealing Materials/Systems||30% of costs up to $150|
|Home Energy Audits||30% of costs up to $150|
|Residential Energy Property|
|Central air conditioners||30% of costs up to $600 for each time (including labor)|
|Natural gas, propane or oil water heaters||30% of costs up to $600 for each time (including labor)|
|Natural gas, propane or oil furnaces and hot water boilers||30% of costs up to $600 for each time (including labor)|
|Improvements or replacements to panelboards, sub-panelboards, branch circuits, or feeders||30% of costs up to $600 for each time (including labor)|
|Heat pumps, biomass stoves and biomass boilers|
|Electric or natural gas heat pump water heaters||30% of costs (including labor)|
|Electric or natural gas heat pumps||30% of costs (including labor)|
|Biomass stoves and biomass boilers||30% of costs (including labor)|
Residential Clean Energy Property Credit:
|Solar panels||30% off the total cost|
|Solar water heaters||30% off the total cost|
|Fuel cell property expenditures||30% off the total cost|
|Small wind energy property expenditures||30% off the total cost|
|Geothermal heat pump property expenditures||30% off the total cost|
|Battery storage technology expenditures||30% off the total cost|
Is there a limit to what can be claimed?
Yes, there are limits to what can be claimed under the Energy Efficient Home Improvement Credit as tabulated below. The credit is only available for certain energy-efficient upgrades made to the primary residence such as insulation, windows, doors, roofing, HVAC systems, and water heaters.
The credit is not available for any type of energy-efficient appliances, such as refrigerators or washing machines, and not all models of these qualifying upgrades are eligible for the credit. There are also limits on the amount of credit that can be claimed for each type of improvement and the credit is subject to a lifetime cap.
Additionally, the credit is only available for upgrades installed in the current tax year and it may not be carried forward. The credit also has an expiration date, which means that it is only available for a certain period of time.
|Product||Aggregate Yearly Tax Credit Maximum|
|Building Envelope Components|
Home Energy Audits
|Electric water heaters|
Natural water heaters
Electric heat pumps
Natural gas heat pumps
|Total maximum tax credit maximum||$3,200|
However, there is no total limit to the Residential Clean Energy Property Credit currently.
How to claim the energy tax credits?
To claim the energy tax credits offered by the federal government, homeowners need to complete Form 5695 as part of their annual federal income tax return. This form can be found on the IRS website or obtained from a tax professional.
The credit is available for certain energy-efficient upgrades made to the primary residence such as insulation, windows, doors, roofing, HVAC systems, and water heaters. It’s important to keep in mind that the credit amount may vary depending on the type of improvement and the date it was installed. To qualify, homeowners must have installed the upgrades during the tax year for which they are claiming the credit.
Additionally, it’s important to note that the credit has a lifetime cap, so homeowners should keep track of the total amount of credit claimed over multiple years. Homeowners are also encouraged to keep all receipts and documentation as proof of the improvements made and the cost of the materials, to ensure they can claim the maximum credit amount possible.
At G.J. Gardner Homes, we strongly support the energy tax credit plan available to homeowners in the U.S. This program provides a significant incentive for homeowners to invest in energy-efficient upgrades for their homes, which not only helps to lower their utility bills but also reduces the overall carbon footprint of the homes we build.
Our team knows firsthand the benefits of this program, as many Americans have been able to take advantage of these credits to make their homes more energy efficient and encourages you to also ask your tax advisor for additional energy saving credits that you may qualify for.