If you are doing improvement work in your home, you should consider the energy efficient and residential clean energy credits as it might give you back some of the money invested on those improvements. Remember to fill out our tax organizer each year so we are aware of those expenses, or let us know if you had any of those expenses.

In the IR-2024-137, the IRS does a great job breaking it in two categories and then, providing details on what the requirements are, the maximum amount of credit available and some more relevant information, like the credit is non refundable (not getting back a refund, just reducing your tax liabilities).

Energy Efficient Home Improvement Credit

As part of the Inflation Reduction Act, beginning Jan. 1, 2023, the credit equals 30% of certain qualified expenses:

  • Qualified energy efficiency improvements installed during the year which can include things like:
    • Exterior doors, windows and skylights.
  • Insulation and air sealing materials or systems.
  • Residential energy property expenses such as:
    • Natural gas, propane or oil water heaters.
    • Natural gas, propane or oil furnaces and hot water boilers.
  • Heat pumps, water heaters, biomass stoves and boilers.
  • Home energy audits of a main home.

The maximum credit that can be claimed each year is: 

  • $1,200 for energy property costs and certain energy efficient home improvements, with limits on doors ($250 per door and $500 total), windows ($600) and home energy audits ($150).
  • $2,000 per year for qualified heat pumps, biomass stoves or biomass boilers.

The credit is nonrefundable which means taxpayers cannot get back more from the credit than what is owed in taxes and any excess credit cannot be carried to future tax years. 

Residential Clean Energy Credit

The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property for a home in the United States installed anytime from 2022 through 2032. 

Qualified expenses include the costs of new, clean energy equipment including: 

  • Solar electric panels.
  • Solar water heaters.
  • Wind turbines.
  • Geothermal heat pumps.
  • Fuel cells.
  • Battery storage technology (beginning in 2023). 

Clean energy equipment must meet the following standards to qualify for the Residential Clean Energy Credit: 

  • Solar water heaters must be certified by the Solar Rating Certification Corporation or a comparable entity endorsed by the applicable state.
  • Geothermal heat pumps must meet Energy Star requirements in effect at the time of purchase.
  • Battery storage technology must have a capacity of at least 3 kilowatt hours. 

This credit has no annual or lifetime dollar limit except for fuel cell property. Taxpayers can claim this credit every year they install eligible property on or after Jan. 1, 2023, and before Jan. 1, 2033. 

This is a nonrefundable credit, which means the credit amount received cannot exceed the amount owed in tax. Taxpayers can carry forward excess unused credit and apply it to any tax owed in future years.