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Tax Blog

Home Renovations Can Qualify for Tax Credits

If you are a homeowner who has invested in making your home more energy efficient, you may be eligible for valuable tax credits to help offset your costs. Thanks to the Inflation Reduction Act 2022, these home energy credits have been expanded, providing greater opportunities for taxpayers to benefit. Two primary credits you can claim are the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit, applicable for the year the qualifying expenditures were made.

Energy Efficient Home Improvement Credit

This credit allows you to claim up to $3,200 for various energy-efficient upgrades. Eligible expenses include:

  • Exterior Doors: Up to $250 per door, with a maximum of $500.

  • Windows and Skylights: Up to $600.

  • Insulation and Air Sealing Materials: No specific limit within the $1,200 cap.

  • Energy Property Expenses: These include natural gas, propane, or oil water heaters, boilers, heat pumps, and biomass stoves.

The maximum credit is $3,200, divided into $1,200 for general energy property costs and improvements, and an additional $2,000 for qualified heat pumps, biomass stoves, or biomass boilers.

Residential Clean Energy Credit

For homeowners who have made significant investments in renewable energy, the Residential Clean Energy Credit can be particularly advantageous. This credit applies to:

  • Solar Panels and Solar Water Heaters: Must be certified by the Solar Rating Certification Corporation or a comparable state-endorsed entity.

  • Wind Turbines, Geothermal Heat Pumps, and Fuel Cells: Geothermal heat pumps must meet Energy Star requirements at the time of purchase.

  • Battery Storage Technology: Must have a capacity of at least 3 kilowatt-hours.

Unlike the Energy Efficient Home Improvement Credit, the Residential Clean Energy Credit has no dollar limit, except for fuel cell property. It is a nonrefundable credit, meaning it can reduce your tax liability to zero, but any excess can be carried forward to future tax years.

By taking advantage of these credits, you not only reduce your environmental footprint but also benefit financially. Ensure that the equipment and improvements meet the necessary standards to qualify, and consult with a tax professional to maximize your savings.

For more information, please contact the professionals at The Center for Financial, Legal, & Tax Planning, Inc., at (618) 997-3436.


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