The U.S. tax code is currently offering generous benefits to homeowners who make energy-efficient improvements. Thanks to a wave of energy-related credits mandated in the Biden Administration’s Inflation Reduction Act, there are many ways to save on federal income taxes. Homeowners can save up to $3,200 annually through home energy tax credits, according to the U.S. Department of Energy’s Energy Star program. For example, purchasing appliances with an Energy Star label can qualify for an energy credit.
Various home energy improvements qualify for tax credits, such as exterior doors, windows, skylights, insulation materials, central air conditioners, water heaters, furnaces, boilers, heat pumps, biomass stoves, home energy audits, and more. There are limits on how much you can deduct for these credits, but the important point to note is that you can claim more than one credit. For 2023 through 2032, the maximum write-off is 30%, up to a maximum of $1,200, with no lifetime limit. The credits can be combined with credits for other qualified upgrades made in the same tax year.
Homeowners are encouraged to keep receipts for any energy-related purchases to claim the credits. The larger tax planning tip is to replace major appliances, windows/doors, or heating/cooling units with energy-efficient units to benefit from a lower tax bill, lower energy costs, and a lower carbon footprint. It is important to consider going green when replacing any major home appliances to maximize these benefits and savings.
The U.S. Department of Energy offers a more detailed guide for those interested in learning more about home energy tax credits. Homeowners can save significantly on their federal tax bill by taking advantage of the credits available for energy-efficient improvements. It is recommended to explore all options and determine which improvements will result in the highest savings and benefits for each individual situation.
With the current tax code being so generous to homeowners making energy-efficient improvements, now is a great time to consider making these upgrades. By utilizing the available tax credits, homeowners can save money on their federal tax bill while also benefiting from lower energy costs and reducing their carbon footprint. It is important to stay informed about the latest regulations and guidelines regarding home energy tax credits to make the most of these opportunities and maximize savings.
