Starting January 1st, 2023, the tax law allows for certain qualified energy-efficient improvements to be made to your home to qualify for a tax credit. To qualify for these credits, the property must be your main home (home you generally live in most of the time) and must be on an existing home, new homes do not qualify. Rental properties do not qualify.
This credit is available for four types of qualified expenses: building envelope components, home energy audits, residential energy property and heat pumps and biomass stoves and boilers. Below are the rules for the three larger credits.
- Building envelope components must have an expected lifespan of at least 5 years and meet certain energy standards. These expenses are available for three main types of envelopes: exterior doors, exterior windows/skylights, and insulation and air sealing materials or systems.
- Exterior Doors- $250 per door credit with a maximum annual credit of $500
- Must meet applicable Energy Star requirement.
- Exterior Windows/Skylights- $600 maximum annual credit
- Must meet Energy Star Efficient certification requirements.
- Insulation and air sealing materials or systems- Credits maxes out at $1,200 per year.
- Must meet the International Energy Conservation Code (IECC) standards in effect at the start of the year 2 years before installation. For example, materials or systems installed in 2024 must meet standards in effect on January 1, 2022.
- All costs above must be materials, labor costs do not qualify for any building envelope components.
- Exterior Doors- $250 per door credit with a maximum annual credit of $500
- Residential Energy Property
- This qualified property includes new:
- Central Air Conditioners
- Natural gas, propane, or oil water heaters
- Natural gas, propane, or oil furnace and hot water boilers.
- Costs of electrical components needed to support these types of property may be included if they meet certain National Electric code standards.
- Must meet the Consortium for Energy Efficiency (CEE) highest efficiency tier.
- The credit is a maximum of $600 per item.
- This qualified property includes new:
- Heat Pumps and Biomass Stoves and Boilers
- Must have a thermal efficient rating of at least 75% to qualify.
- Maximum credit of $2,000 per year, costs can include labor.
- This qualified property includes new:
- Electric or natural gas heat pumps
- Electric or natural gas heat pump water heaters
- Biomass stoves and boilers
If you are considering making any home improvements listed above, you may be able to utilize these new credits. If you have any questions or would like more information regarding these items, please contact our office at 307-577-4040 or see the attached IRS website with more information https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit