2024 Federal Tax Credits

---

In August of 2022, President Biden signed the Inflation Reduction Act, which includes provisions for lowering prescription drug prices, extending certain aspects of the Affordable Care Act, and significant climate protection funding. 

This bill also provides funding for programs that allow the federal government to offer specific tax credits and rebates for installing or new or upgrading existing HVAC equipment. The most significant rebates are for homes that install multi-zone mini-split heat pump systems. Still, there are provisions for other HVAC-related improvements, plus electrical circuit box and wiring upgrades, that may allow you to qualify. 

 The Federal Energy Tax Credit is a specified amount that the homeowner can subtract from taxes owed to the IRS to help offset the cost of improvements to the home’s energy efficiency.  

If you made qualified energy-efficient improvements to your home after January 1st, 2023, you could be eligible for up to $3,200 in tax credits. And this isn’t a “one-time only” offer. This $3,200 credit can be applied to future improvements to your home’s energy efficiency through tax year 2032.

Beginning January 1st, 2023, the Energy Efficient Home Improvement Credit can equal up to 30% of certain eligible expenses, including:

• Qualified energy improvements installed during the previous year.
• Residential energy property expenses.
• Home energy audits. 

There are limits on the allowable annual credit as well as on the amount of credit for certain types of qualified expenses.

The maximum allowable credit each homeowner can claim for a given year is:

• $1,200 for energy property costs and specific energy-efficient home improvements with a limit of $250 per door, whole-house window installations are capped at a $600 credit, and an energy audit will get you a $150 credit.  
• $2,000 per year for qualified heat pumps and biomass stoves or boilers. 

The tax credit has no lifetime dollar limit, and you can claim the maximum annual credit every year that eligible improvements are made through the end of 2033. The credit, however, is “non-refundable”, meaning that you won’t get back more on the credit than you owe in taxes, nor can you apply any excess credit to a future tax year. 

To file for an energy tax credit, you must complete and file an I5695 RS form with your tax return. Since this is a tax credit, please don’t consider it a refund. You won’t be getting this money back, but it will be deducted from the taxes you owe for that year.