2023 brings with it some substantial changes in federal tax credits associated with improving the energy efficiency of your home. Esh Builders can help.
The Inflation Reduction Act of 2022 (IRA) focuses on expanding and extending two nonrefundable tax credits meant to encourage you to invest in energy efficiency improvements or install clean energy in your home.
- The energy efficient home improvement credit provides a subsidy for certain investments that reduce energy consumption in homes. This credit is designed to encourage you to make energy-saving improvements to your home, such as installing insulation, energy-efficient windows, or doors.
- The residential energy tax credit which subsidizes investments in renewable energy production at your residence.
The IRA also created grants for states to establish rebate programs to mirror the savings covered by these credits—the HOMES rebate program and the high-efficiency electric home rebate program. These state programs are not yet operational, but once they are you can claim both a rebate and one of the residential tax credits for the same project.
Energy Efficient Home Improvement Credit
The IRA reintroduced this tax credit for qualifying property placed in service during tax year 2022. For improvements placed in service from 2023 through 2032, the scope of qualifying expenses has been expanded and the credit amount is substantially higher.
Residential Energy Property Credit
Through 2019, you could claim a credit worth up to 30% of qualifying expenditures. The credit’s rate was scheduled to be reduced to 26% through 2022 and 22% in 2023, expiring after 2023. The IRA restored the 30% credit for the 2022 tax year and made battery storage technology placed in service in 2023 or later eligible.
These credits are claimed on Form 5695. The instructions for this form contain additional information regarding credit eligibility.
Contact Esh Builders today to find out how we can help you to take advantage of these new tax credits while lowering the overall operating cost of your home!
