Home Energy Incentives
Key Provisions for 2023 + to maximize your home renovation projects!
IRC 25C now allows you to receive a $1200 per YEAR tax credit!
This code section focuses on your personal home and NOT rental properties!
The credit is equal to 30% of what you spent on qualified energy efficiency improvements, residential energy property, and home energy audits during the year
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1Qualified energy efficiency improvements:
This primarily refers to home envelope improvements.
This includes various types of insulation, energy-efficient windows, and energy-efficient exterior doors.
To qualify for the credit, these improvements to the building envelope need to meet certain criteria:
Windows – must meet EnergyStar most efficient certification requirements.
Exterior doors – must meet applicable Energy Star requirements.
Insulation – must meet prescriptive criteria from a recent International Energy Conservation Code.
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2Residential energy property
So what is residential energy property that qualifies towards your $1200 annual credit?
Heat pumps, central air conditioners, water heaters, furnaces, and boilers as long as the appliance meets the highest efficiency tiers (see below for unique carve out)
Biomass stoves and boilers
Certain energy-efficient oil furnaces and hot water boilers
Cost to upgrade a panel to at least 200 amps panels
Home Energy Audits - capped at a maximum of $150 per taxpayer each year.
NOTE - labor costs can be included here!
Bonus:
The $1,200 annual limit and the $600 residential energy property limit don’t apply to heat pumps.
Installation of heat pumps at your home get their own $2,000 tax credit!
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3Be Strategic!
Since this credit is renewable each year, we encourage you to strategically invest in home improvements across two years. Let’s walk through an example:
You decide it is time to stop letting heat leak out the windows and want to install new windows in your home for $5,000.
Option 1: You hire the contractor to install the windows in November. He completes installation on 12/15. When you file your taxes, we inform you that you have a nice $1200 credit. Not bad.
Option 2: You hire the contractor to install the windows in December. He completes the lower level portion on 12/15 and he invoices you + you pay the bill on 12/31.
In January, he completes the upper levels and invoices you the remainder of the $5000.
By spreading across tax years, you now have a $2400 tax credit! Your total out of pocket cost is now only $2600!