Did you know that this year the Inflation Reduction Act has been expanded to add increased tax benefits? Tax-paying homeowners can take advantage of this amendment for energy efficient projects around the house. This includes heating and cooling, windows, insulation, water heaters, solar, battery storage, and more.
Homeowners can apply for up to a 30% tax credit of the costs of installing certain home improvements during the year. The annual limit is $1200, with the exception of heat pumps which have a limit of $2000. The tax credit only applies to existing homes, meaning it cannot be applied to new builds, and the home must be occupied by the owner.
You should also know that there are tax credit limits for specific qualifying projects:
- Doors: 30% of cost; $250 per door; up to $500
- Windows and skylights: 30% of cost up to $600, labor not included
- Insulation, air sealing: 30% of cost up to $1200, labor not included
- Home energy audits: 30% of cost up to $150
- AC, water heater, furnace, boiler, electrical improvements: 30% up to $600 each, labor included
- Electric or natural gas heat pumps and heat pump water heaters, biomass stoves and boilers: 30% of cost, up to $2000, labor included
Additionally it is important to note the required performance specifications:
- Doors and windows: ENERGY STAR
- Insulation: IECC code standard for two years prior
- Home energy audits: written report that identifies the most significant and cost-effective improvements, their energy and cost savings
- AC, water heater, furnace, heat pumps, heat pump water heaters: meet or exceed CEE standard
- Oil furnaces and hot water boilers: ENERGY STAR
- Electric panels: meet NEC and 200 amps or more
Be sure that you or your tax accountant complete IRS form 5695 when doing your taxes to receive these credits. Credits cannot be carried forward into subsequent years so be sure not to miss your chance this year. Depending on which improvements are made, homeowners could qualify for up to $3200 per year!
Before you start any home improvements this year, be sure to understand these new tax credits and consult with your accountant.
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Photo by Kostiantyn Li
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