Claiming Tax Credits for Home Improvements: A Guide for Homeowners
As a homeowner, did you know that you can claim tax credits for energy-efficient home improvements? Thanks to the Inflation Reduction Act of 2022, the IRS has expanded the credit amounts and types of qualifying expenses, making it a great opportunity for homeowners to save money while making their homes more energy-efficient.
Understanding the Credits
Who Can Claim the Credits
- Primary Residence: Homeowners who improve their primary residence are eligible to claim a credit for qualifying expenses.
- Renters and Second Home Owners: Renters and owners of second homes used as residences may also be able to claim credits.
Energy Efficient Home Improvement Credit
- Qualifying Expenses: Expenses such as exterior doors, windows, insulation materials, central air conditioners, water heaters, and home energy audits may qualify.
- Credit Amount: Homeowners can take a percentage of the total improvement expenses, with a maximum credit of $1,200 from 2023 through 2032.
Residential Clean Energy Credit
- Qualifying Expenses: This credit applies to expenses related to solar, wind, geothermal power generation, fuel cells, and battery storage.
- Credit Amount: Homeowners can take a percentage of the total improvement expenses, with no annual maximum or lifetime limit from 2022 to 2032.
How to Claim the Federal Tax Credits
These credits are managed by the U.S. Internal Revenue Service (IRS) and can be claimed with your federal income taxes for the year in which the upgrades are made. Here’s how to claim them:
- Use the IRS Form 5695 to claim the credits.
- Ensure that your home improvement meets the eligibility criteria outlined by the IRS.
Strategies to Maximize Your Federal Tax Savings
To make the most of the annual credit amounts, homeowners can strategize their home energy efficiency improvements. Here are a few examples:
- Spread Your Upgrades: Plan your upgrades to spread them over a few years to maximize the annual credit amounts you can claim.
For more information on the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit, refer to the following resources:
- Inflation Reduction Act of 2022
- Frequently asked questions about energy efficient home improvements and residential clean energy property credits
- Credits and deductions under the Inflation Reduction Act of 2022
- Interactive guide to energy credits available under the Inflation Reduction Act
- Publication 5886-A, Clean Energy Tax Incentives for Individuals
- Publication 5886-A (Spanish), Clean Energy Tax Incentives for Individuals
By taking advantage of these tax credits, homeowners can not only make their homes more energy-efficient but also benefit from significant cost savings. Whether it’s upgrading to energy-efficient windows or investing in solar power generation, these tax credits provide a compelling incentive for homeowners to make sustainable improvements to their properties. So, if you’re considering home improvements, don’t miss out on the opportunity to claim these valuable tax credits and enhance the value of your home while contributing to a greener planet.
Feldco’s products and services aim to help homeowners in the Midwest increase energy efficiency, save on bills, and create a comfortable living environment. For more information, get a free quote for energy-efficient products.