Have you recently completed or are considering home energy efficiency improvements or renewable energy? The Inflation Reduction Act (IRA) includes new federal tax credits for qualifying energy-efficient home upgrades made in 2022, and a separate set of credits that begin January 1, 2023.
ENERGY STAR certifies a wide range of home energy efficiency products that can save you energy, save money, and protect the climate. Federal tax qualifying products range from equipment such as furnaces to materials that improve your home's envelope or exterior (windows, doors, insulation, etc.).
An overview is provided below, and information is available at Energy Star Federal Tax Credits and at the property tax credit guidance. Another helpful resource is the White House Clean Energy site, where you can sign up to receive updates. If you scroll past the sign-up button, a section on Tax Credits and Rebates for Families shows options for 2022 and what opportunities will be available next year.
2022 Energy Efficiencies: In order to apply any qualifying tax credits on your 2022 tax return, download and complete the 2022 version of IRS Form 5695: Residential Energy Credits. If you have questions, contact your tax preparer or the Internal Revenue Service (IRS). Some contractors can also give you advice.
2023 to 2032 Energy Efficiencies: New energy efficiency tax credits will be available January 1, 2023 through Dec. 31, 2032. While the tax credit amount is mostly limited to 30% of project cost, the previous lifetime cap of $500 has been changed to an annual cap of $1,200 to $2,000, depending on the improvements. This means you will be able to claim credit for more projects, especially if they are spread out over multiple years. These Energy Efficiency Home Improvement credits will be applicable to these services or products and more: home energy audits, heat pumps, water heaters, biomass stoves, boilers, insulation, windows/skylights, exterior doors, central A.C., water heaters and electric panel upgrades.
Renewable Energy tax credits for some types of geothermal, wind and solar equipment have been extended through the end of 2023. It’s best to maximize energy efficiency and conservation before or in tandem with considering renewables, such as adding LEDs to reduce your electrical load. At the same time, you might also want or need to consider additional electrical-based equipment options such as an EV charger or electric dryer, which then shifts your electrical load in the other direction. Using this comprehensive approach is one the steps that helps you right-size a solar array or other system for your home. Learn more here.
This article was prepared by Johnson County Planning, Development and Sustainability from online information and an EPA Energy Star news alert, 9/15/2022.