IRS: Going Green Could Help Taxpayers Qualify for Expanded Home Energy Tax Credits

IRS Newswire

May 4, 2023

Issue Number: IR-2023-97

Inside This Issue

WASHINGTON – The Internal Revenue Service reminds taxpayers that making certain energy efficient updates to their homes could qualify them for home energy tax credits.

The credit amounts and types of qualifying expenses were expanded by the Inflation Reduction Act of 2022. Taxpayers who make energy improvements to a residence may be eligible for expanded home energy tax credits.

What taxpayers need to know

Taxpayers can claim the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit for the year the qualifying expenditures are made.

Homeowners who improve their primary residence will find the most opportunities to claim a credit for qualifying expenses. Renters may also be able to claim credits, as well as owners of second homes used as residences. Landlords cannot claim this credit.

IRS encourages taxpayers to review all requirements and qualifications at IRS.gov/HomeEnergy for energy efficient equipment prior to purchasing. Additional information is also available on energy.gov, which compares the credit amounts for tax year 2022 and tax year 2023.

Energy Efficient Home Improvement Credit

Taxpayers that make qualified energy-efficient improvements to their home after Jan. 1, 2023, may qualify for a tax credit up to $3,200 for the tax year the improvements are made.

As part of the Inflation Reduction Act, beginning Jan. 1, 2023, the credit equals 30% of certain qualified expenses:

Qualified energy efficiency improvements installed during the year which can include things like:
- Exterior doors, windows and skylights.
- Insulation and air sealing materials or systems.

Residential energy property expenses such as:
- Central air conditioners.
- Natural gas, propane or oil water heaters.
- Natural gas, propane or oil furnaces and hot water boilers.

Heat pumps, water heaters, biomass stoves and boilers.
Home energy audits of a main home.

The maximum credit that can be claimed each year is:

$1,200 for energy property costs and certain energy efficient home improvements, with limits on doors ($250 per door and $500 total), windows ($600) and home energy audits ($150).
$2,000 per year for qualified heat pumps, biomass stoves or biomass boilers.

The credit is available only for qualifying expenditures to an existing home or for an addition or renovation of an existing home, and not for a newly constructed home. The credit is nonrefundable which means taxpayers cannot get back more from the credit than what is owed in taxes and any excess credit cannot be carried to future tax years.

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