Energize Your Savings: Exploring Tax Credits for a Greener Home

Embracing a more energy-efficient future, the Inflation Reduction Act of 2022 has paved the way for homeowners to readily harness tax credits, enabling them to save money by paying less in taxes while investing in greener, more sustainable homes. Here’s what you need to know.

Starting on January 1st, 2023, you can claim the Energy Efficient Home Improvement Credit more than once in your lifetime. If you plan improvements over the next several years you can claim substantially more credits compared to the limits under the old credit. The new credit is calculated as 30% of qualified expenses incurred to make your primary residence more energy efficient. The maximum a taxpayer can claim is $1,200 per year, but this can increase to $2,000 if you invest in qualified heat pumps, biomass stoves, or boilers. The credit can only be used to reduce tax, it’s is non-refundable and does not carry over to future years. Importantly, this credit is not available to businesses and can only be claimed through 2032.

There are limits on certain qualified expenses, as listed below:

  • Home energy audits: Up to $150
  • Energy Star Windows and skylights: Up to $600
  • Central A/C, natural gas, propane, water heaters, boilers, and oil furnaces certified at the highest Consortium for Energy Efficient (CEE) Tier: Up to $600
  • Energy Star Doors: $250 per door, with a maximum of $500

The Residential Clean Energy Credit qualifies for 30% of qualified expenses incurred anytime between 2022 and 2032 in clean energy property. The credit will decline and eventually phase out entirely after December 31, 2034. It’s worth noting that this credit has no annual or lifetime limit, except when claiming it for fuel cell property. The credit is non-refundable but can be carried forward into future years. Qualified expenses include:

  • Solar electric panels
  • Solar water heaters certified by the Solar Rating Certification Corporation or a comparable entity
  • Wind turbines
  • Geothermal heat pumps that are Energy Star approved
  • Fuel cell: (limited to $500 for each half-kilowatt of capacity. If there is more than one person living in the home, it’s important to note that the combined credit for all residents cannot exceed $1,667 for each half-kilowatt of fuel cell capacity)
  • Labor costs

For more information on both credits, you can click on the links below:

Energy Efficient Home Improvement Credit: https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit

Residential Clean Energy Credit: https://www.irs.gov/credits-deductions/residential-clean-energy-credit

Always consult with a tax professional for personalized advice.


Matthew Bluzer EA