With tax season in full swing, you may be searching for valuable tax deductions. If you’ve had recent energy efficiency upgrades made to your home, there may be some tax benefits waiting for you. In this blog we’ll answer the question of:
Are energy efficiency upgrades tax deductible?
If you’re wondering this, you’re not alone. We discovered all kinds of questions about this topic that homeowners just like you were interested in. We’ll dive into this and more in this guide to navigating the tax season with an energy efficiency home. Here are some of the things we’ll cover:
- What improvements qualify for the residential energy tax credit?
- What types of tax credits are available for energy efficiency?
- Can energy efficient windows be claimed on taxes?
- Do energy efficient appliances qualify for tax credit?
- How do I claim the tax credit for residential energy efficiency?
- How do I claim tax credit for energy efficient appliances?
- How do I claim the tax credit for energy efficient windows?
Also, please note we are not tax people, so don’t rely on us for final information. It’s best to check with your tax accountant and the IRS about your particular situation and the most updated information for this tax season. That being said, let’s get right into it.
What improvements qualify for the residential energy tax credit?
The IRS distinguishes two types of upgrades.
- qualified energy efficiency improvements
- residential energy property costs
Qualified energy efficiency improvements
Current qualifying energy efficiency improvements include home insulation, improvements to exterior doors, windows and skylights, and certain roofing materials.
How much is the credit for qualifying energy efficiency improvements?
A tax credit for 10% of the cost of these improvements may be available to you. This credit is worth a maximum of $500, until its expiration year (discuss the current date with your tax accountant or the IRS). There are some limits to this depending on the type of upgrade you’re investing in.
- A maximum of $200 can be for windows.
- The maximum tax credit for a furnace circulating fan is $50.
- The maximum credit for a furnace or boiler is $150.
- The maximum credit for any other single residential energy property cost is $300.
Read more about this on the TurboTax website.
Qualifying residential energy properties
Current qualifying energy properties include solar electric property, solar water heaters, geothermal heat pumps, small wind turbines, fuel cell property, and qualified biomass fuel property expenditures.
How much is the credit for qualifying energy properties?
Depending on the improvement and the date it was placed in service, your tax credit will be a percentage of the total cost. Here are the dates that correspond to the percentage you might receive:
- 30%: In the case of property placed in service after December 31, 2016, and before January 1, 2020.
- 26%: In the case of property placed in service after December 31, 2019, and before January 1, 2023.
- 22%: In the case of property placed in service after December 31, 2022, and before January 1, 2024.
Read more information about this on the IRS website.
What types of tax credits are available for energy efficiency?
Depending on your home and your tax situation, you may be eligible for tax credits on home improvements such as roofing, insulation, energy efficient windows, door and skylights, and energy efficient appliances. Here are some of the potential options (not all of these may be available to you, this is only for reference):
- A 10% tax credit (up to $500) for ENERGY STAR certified metal and asphalt roofs with pigmented coatings or cooling granules designed to reduce heat gain.
- A 26% tax credit for having a solar panel system installed on your home.
- Up to 10% tax credit for ENERGY STAR certified energy-efficient windows, doors and skylights.
- A 10% tax credit (up to $500) for adding insulation to your home.
- A $300 tax credit for replacing or installing your central air conditioning with ENERGY STAR certified units.
Can energy efficient windows, doors and skylights be claimed on taxes?
Yes, you could be eligible for a potential tax credit when you replace your external windows, doors and skylights with ENERGY STAR certified energy-efficient models. This tax credit is worth 10% of the cost, up to $500, not including installation. Windows are capped at $200.
Find out more about this tax credit on the ENERGY STAR website.
Do energy efficient appliances qualify for tax credit?
Only appliances and equipment that utilize renewable energy have the opportunity for the federal tax credit. This includes solar energy equipment and geothermal heat pumps for your home.
Read more about this and how to apply on the TurboTax website.
Rebates for energy efficient appliances
Some ENERGY STAR certified appliances; however, may be eligible for an immediate rebate. These rebates vary widely depending on the appliance and your utility company. To find out if you’re eligible, you can use the ENERGY STAR rebate finder.
How to claim a tax credit for energy efficient upgrades
The easiest way to claim a tax credit for making your home energy efficient is to consult a professional about it. If you’ve had any recent upgrades in the last year done to your home, be sure to bring the records to your accountant during tax season.
According to ENERGY STAR, you’ll need Form 5695 in order to claim the credit.
Again, we don’t offer tax advice here, so contact the IRS for additional information and questions:
Are energy efficient home improvements tax deductible?
It depends on your home and the type of improvements you’ve made, but there’s a decent chance you’ll be able to take advantage of improving the efficiency of your home with tax deductions. Be sure to check with your tax accountant for your individual situation and which tax deductions and rebates you might qualify for. And if you haven’t upgraded your home’s efficiency yet, now is a great time to get a free home audit from the pros and Energypro.