Optima Tax Relief Reviews Home Energy Tax Credits

The Internal Revenue Service (IRS) is encouraging taxpayers to join the green movement while reaping financial benefits.

18:02 31 May 2023

As the world increasingly prioritizes environmental sustainability, the Internal Revenue Service (IRS) is encouraging taxpayers to join the green movement while reaping financial benefits. The IRS has introduced expanded home energy tax credits aimed at incentivizing environmentally friendly upgrades. By making energy-efficient improvements to their homes, taxpayers can not only contribute to a greener future but also qualify for valuable tax credits. In this article, Optima Tax Relief will explore the IRS's efforts to promote eco-friendly practices and how taxpayers can take advantage of these expanded tax credits. 

Taxpayers can claim the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit in the year in which they make the qualifying expenditures. Homeowners who make improvements to their principal home have the most opportunities to claim a tax credit for qualifying expenses. Renters, as well as owners of second properties used as residences, may be eligible for credits. These credits are not available to landlords. 

Taxpayers who make qualified energy-efficient changes to their home after January 1, 2023, may be eligible for the Energy Efficient Home Improvement Credit. The credit equals 30% of certain qualified expenses, up to $3,200. Expenses can include qualified energy efficiency improvements made like exterior doors, windows, and insulation. It also includes residential energy property costs like central air conditioning, heaters, and boilers. Up to $1,200 can be claimed for energy property costs and some energy efficient home improvements while up to $2,000 can be claimed for qualified heat pumps, biomass stoves or biomass boilers. 

Taxpayers who invest in energy-saving upgrades for their primary residence, such as solar, wind, geothermal, fuel cells, or battery storage, may be eligible for an annual residential clean energy tax credit. The Residential Clean Energy Credit is equal to 30% of the cost of new, certified clean energy property installed in a residence in the United States installed between 2022 and 2033. Qualified expenses include solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology. These are nonrefundable credits, which means the amount of credit obtained cannot exceed the amount of tax owed. Taxpayers are advised to keep detailed records of their purchases and expenses while the changes are being completed. This will allow them to claim the applicable credit during tax season.