Home Energy Credit
/As the summer starts to wind down, hibernation season starts to begin. I don’t know about you, but during the winter months is when my husband and I pack up our flip flops and bathing suits in exchange for our sweatshirts and tool belts. During the colder months is when we coop ourselves inside and see what we can improve in our home. The IRS has two home credits that can help you save money on your taxes when you make qualifying improvements: the Energy Efficient Home Improvement Credit or the Residential Energy Clean Property Credit.
The Energy Efficient Home Improvement Credit is for the exterior doors and windows, AC units, water heaters, furnaces, etc. that meet the requirements for the credit. The manufacturer of the item should have written certification that it qualifies for this credit (this can be found in the owner’s manual or on the company’s website). Be sure to keep your receipt as proof of purchase and provide it to your tax preparer. To receive the credit, you must purchase and install the product in the same year. From 2023-2032, you can take 30% of the total cost of the improvement as a credit on your return, up to $1,200. There is no lifetime limit on this credit.
The Residential Energy Clean Property Credit is meant for solar, wind, and geothermal power generation, solar water heaters, fuel cells, and battery storage. From 2022-2032, you can take 30% of the total expense in the year the improvement was installed, with no maximum or lifetime limit.
Keep in mind that both credits are nonrefundable, meaning that you cannot take a credit that exceeds the amount you owe in tax. However, you can carry forward the credit to the following years until it is completely used up. I know home improvement is a daunting and pricey task, but these credits should hopefully help ease some of the burden.
- Lacey Richey, Tax Professional, Smitson Erhart-Graves Tax Advisors
