Energy Efficient Home Improvement Credit
- Under the Energy Efficient Home Improvement Credit: a taxpayer may not carry the credit forward. Thus, if a taxpayer does not have sufficient tax liability to claim all or a portion of the credit in the year in which the related property for which the qualifying expenditure is placed in service, the unused amount of the credit may never be claimed.
- Energy Efficient Home Improvement Credit is available for exterior doors, windows, skylights, insulation and air sealing materials or systems. The component must reasonably be expected to remain in use for at least 5 years.
- Beginning January 1, 2023, the amount of the credit is equal to 30% of the sum of amounts paid by the taxpayer for certain qualified expenditures, including (1) qualified energy efficiency improvements installed during the year, (2) residential energy property expenditures during the year, and (3) home energy audits during the year. There are limits on the allowable annual credit and on the amount of credit for certain types of qualified expenditures. The credit is allowed for qualifying property placed in service on or after January 1, 2023, and before January 1, 2033.
- The following energy efficient home improvements are eligible for the Energy Efficient Home Improvement Credit:
- Building envelope components satisfying the energy efficiency requirements
- Exterior doors (30% of costs up to $250 per door, up to a total of $500); exterior windows and skylights (30% of costs up to $600); and insulation materials or systems and air sealing materials or systems (30% of costs).
- Home energy audits (30% of costs up to $150.
- Residential energy property (30% of costs, including labor, up to $600 for each item) satisfying the energy efficiency requirements under the Energy efficiency requirements section:
- Central air conditioners;
- Natural gas, propane, or oil water heaters;
- Natural gas, propane, or oil furnaces and hot water boilers; and
- Improvements to or replacements of panelboards, sub-panelboards, branch circuits, or feeders that are installed along with building envelope components or other energy property with its installation and use.
- Heat pumps and biomass stoves and biomass boilers (30% of costs, including labor) satisfying the energy efficiency requirements under the Energy efficiency requirements section
- Electric or natural gas heat pump water heaters;
- Electric or natural gas heat pumps; and
- Biomass stoves and biomass boilers.
Residential Clean Energy Property Credit
- Under the Residential Clean Energy Property Credit: a taxpayer may carry forward the unused amount of the credit to reduce tax liability in future tax years.
The residential clean energy property credit is a 30-percent credit for certain qualified expenditures made by a taxpayer for residential energy efficient property. The IRS extended the residential clean energy property credit through 2034, modified the applicable credit percentage rates, and added battery storage technology as an eligible expenditure.
The credit applies for property placed in service after December 31, 2021, and before January 1, 2033. The credit percentage rate phases down to 26 percent for property placed in service in 2033, 22 percent for property placed in service in 2034, and no credit is available for property placed in service after December 31, 2034.
The following residential clean energy expenditures are eligible for a Residential Clean Energy Property Credit of 30% of the cost:
- Solar electric property expenditures (solar panels);
- Solar water heating property expenditures (solar water heaters);
- Fuel cell property expenditures;
- Small wind energy property expenditures (wind turbines);
- Geothermal heat pump property expenditures; and
- Battery storage technology expenditures.
In general, traditional roofing materials and structural components do not qualify for the Residential Clean Energy Property Credit because they primarily serve a roofing structural function. However, some solar roofing tiles and solar roofing shingles serve as solar electric collectors while also performing the function of traditional roofing, serving both the functions of solar electric generation and structural support and such items qualify for the credit.
(Excerpt from IRS FAQ)
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