Green Energy Tax Credits for Homeowners

[Julio Gonzalez]

Did you know that as a homeowner, you are able to take advantage of green energy tax credits? These tax incentives can help offset making energy efficient upgrades to your home. There are two tax credits that are available - the Residential Clean Energy Property Credit and the Energy Efficient Home Improvement Credit. Let’s discuss them further.

Residential Clean Energy Property Credit

This tax credit allows taxpayers to receive a nonrefundable tax credit equal to 30% of expenditures for renewable energy. There isn’t an overall dollar limit for this credit. This is for properties placed into service between January 1, 2022 and December 31, 2032.

Expenditures that are eligible are:

• Solar power
• Fuel cells (up to $500 per half kilowatt of storage capacity)
• Wind energy
• Battery storage technology
• Geothermal heating

Both newly constructed homes and new builds are eligible for this tax credit. There are a few general requirements such as:

• Battery Storage Technology: Battery must have a minimum capacity of three kilowatt-hours.
• Solar Water Heating: The property must be certified by the Solar Rating Certification Corporation (or an entity that is comparable)
• Geothermal Heat Pumps: At the time the expenditures are made, the heat pump must meet all Energy Star standards that are in effect.

Energy Efficient Home Improvement Credit

This tax credit rewards those taxpayers that make upgrades in order to reduce the overall energy consumption of their home. The annual credit is up to $3,200. This is for properties placed into service between January 1, 2023 and December 31, 2032.

This credit primarily subsidizes three expense categories:

• Installation of qualified energy property
• Energy efficient home improvements
• Home energy audits

Newly built homes are not eligible for this credit, only existing homes, home renovations and home additions. There are a few general requirements such as:

• Water Heaters / HVAC: Eligible systems include electric heat pumps, natural gas heat pumps, heat pump water heaters, central air conditioners, natural gas water heaters, propane water heaters, oil water heaters, natural gas furnaces, propane furnaces, oil furnaces and hot water boilers. All equipment must achieve the highest Consortium for Energy Efficiency (CEE) efficiency tier that is in effect the year the property is placed in service.
• Biomass Boilers / Biomass Stoves: Oil furnaces and hot water boilers can also qualify if they meet 2021 Energy Star efficiency criteria and are rated for use with fuel blends consisting of at least 20% eligible fuel.
• Insulation: Insulation materials and air sealing systems must meet applicable International Energy Conservation Code (IECC) standards.
• Exterior Doors: Exterior doors must meet all applicable Energy Star requirements.
• Branch Circuits / Panelboards: Panelboards, sub-panelboards, branch circuits and feeders must meet National Electrical Code (NEC) standards and have a load capacity of at least 200 amps.
• Skylights / Windows: Windows and skylights must have obtained the Energy Star Most Efficient certification.
• Hot Water Boilers / Oil Furnaces: Oil furnaces and hot water boilers can also qualify if they meet 2021 Energy Star efficiency criteria and are rated for use with fuel blends consisting of at least 20% eligible fuel.

The amount of the tax credit is dependent upon the individual component:

• Branch circuits and feeders: 30% of costs (including labor)
• Insulation: 30% of costs
• HVAC and water heaters: 30% of costs (including labor) up to $600 per item
• Exterior doors: 30% of costs up to $250 per door for a maximum total of $500
• Panelboards and sub-panelboards: 30% of costs (including labor)
• Home energy audits: 30% of costs up to $150
• Heat pumps: 30% of costs (including labor)
• Biomass stoves and boilers: 30% of costs (including labor)
• Windows and skylights: 30% of costs up to $600

Here is the IRS fact sheet for additional information. Do you have any questions about how to utilize these tax credits?