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Keep More of Your Cash with These Green Tax Credits

Finances | By Lauren Kim | 0 Likes
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If you made energy-saving home improvements to your home last year, you may be able to see some extra green come your way this year thanks to federal tax credits available to homeowners: the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit.

The first is for improvements made to the energy efficiency of your home, and the second is for projects like solar panels and wind turbines. While these credits are nonrefundable (meaning they won’t increase any refund you may receive), if you claim one or both when filing your taxes, you may be able to reduce how much you owe.

The Energy Efficient Home Improvement Credit

This credit allows you to recoup some of what you paid for certain energy-saving changes you made to your primary home in 2022, such as to your furnace, central air conditioning, hot water heater, windows, doors, and roof. For each qualifying upgrade, you may be able to get a tax credit for up to 10 percent back.

However, if you claim this credit for any improvements made to your home last year, you should be aware that there are some limitations. For one, it has a $500 lifetime limit and a $200 lifetime limit for windows. Additionally, the amount of credit you may be entitled to claim for each qualified project can vary. For instance, you can only receive up to $300 for any single item, $150 for a hot-water boiler and a natural gas, propane, or oil furnace, and $50 for any advanced main-air circulating fan. This tax credit also doesn’t apply to new construction and rentals.

If you didn’t make any energy-efficient upgrades to your home last year, you can still take advantage of this credit going forward, and with better terms. For qualifying improvements completed this year and through 2032, these amendments to the credit will be in place:

  • You can get up to 30 percent back on the total amount you pay for all qualifying energy improvements made to your home within a specific tax year.
  • The $500 lifetime limit no longer applies; instead, there’s a yearly limit of $1,200.
  • There’s a $600 per limit item and a specific limit only on external doors: $250 per door and $500 in total.
  • Improvements can be made to any home you reside in, not just your primary residence.
  • As much as $150 can be credited to a home energy audit.
  • Roofs no longer qualify.

To claim this credit, use Form 5695.

Residential Clean Energy Credit

This credit can be used for solar electric, wind, geothermal, and other alternative energy equipment you installed in your home last year and will cover 30 percent of your expenditures. The credit can be applied to a system added to a vacation residence, but only for the percentage of the year you resided there. This tax credit also doesn’t apply if you lease your system. If you have yet to install such a system for your home, you can still do so in future years—this credit will be available to claim through 2034, though the amount you can get back will drop to 26 percent for 2033 and 22 percent for 2034.

You may also qualify for state and local incentives, such as tax credits and rebates, that could lower how much you pay to purchase and install solar-energy equipment, if you have added or plan to add it to your home. Some states that offer a high number of solar incentives for its residents include California, Texas, Minnesota, and New York.

Use Form 5695 to claim this credit.

 

If you’ve made energy-related home improvements last year and claim these credits when filing your taxes—you’ll be glad you did. Just don’t forget to file by the deadline!

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