Did you know you could save on your taxes by upgrading to cleaner and more efficient home upgrades? That’s right – federal income tax credits are available until 2032, offering annual savings of up to $3,200 when you switch to ENERGY STAR-certified appliances and products.
These tax credits apply to improvements made to your primary residence. You can claim the maximum annual credit each year you make eligible upgrades, all the way through 2032. Keep in mind, these credits are nonrefundable, so they can’t exceed the taxes you owe. Plus, excess credit cannot be carried forward to future tax years.
Electric Home Upgrades
Fill in tax code 25c Submit IRS Form 5695 IRS Form 5695 Instructions
If you’re making the switch to greener energy for your primary residence – whether it’s solar, wind, or geothermal – you can claim the credit for these upgrades on both new and existing homes across the U.S. And here’s a bonus: any excess credit can be carried forward and applied to reduce your future tax liabilities.
Green Home Energy Upgrades
Fill in tax code 25d. Submit IRS Form 5695. IRS Form 5695 Instructions
Can renters participate in these tax credits?
Absolutely! Renters can also get in on the action when it comes to tax credits. Whether it’s investing in battery storage, electric vehicles, or portable window-unit heat pumps, there are options for everyone to contribute to a greener future.
Maximizing your federal tax credits for home upgrades
Ready to make the most of those federal tax credits for your home upgrades? Here’s a strategic plan to help you maximize your savings over the next few years:
Year 1: Get a Home Energy Assessment and Audit
Kick things off with a home energy assessment/audit to pinpoint the most impactful and cost-effective energy efficiency improvements for your home. If your heating or cooling system is showing its age and you’re eyeing a new heat pump HVAC, start by optimizing your insulation, windows, and doors to ensure you’re not paying for more heating and cooling than necessary. Combine these upgrades in one year to claim:
- 30% off, up to $150 for the assessment/audit
- $1,200 for insulation
- 30% off, up to $600 for windows
- 30% off, up to $500 for two doors ($250 per door)
Your total tax credit claim would be $2,450 for year one.
Year 2: Upgrade Your Old Furnace to Heat Pumps
In the following year, consider swapping out your old furnace for a heat pump HVAC along with an electrical panel upgrade. Combine the $2,000 credit for the heat pump HVAC with tax credits up to $600 for the electrical panel:
- $600 for electrical panel
- 30% off, up to $2,000 for heat pump HVAC
Your total tax credit claim would be $2,600 for year two.
Year 3: Keep the Momentum Going
In year three, keep the momentum going by replacing your water heater and tackling any remaining window upgrades. By further enhancing your home with new windows and a heat pump water heater, you can claim:
- 30% off, up to $600 for upgrading your remaining windows
- 30% off, $250 for one door
- 30% off, up to $2,000 for the heat pump water heater
Your tax credit claim would be $2,850 for year three.
These credits are overseen by the U.S. Internal Revenue Service (IRS) and can be claimed when filing your federal income taxes for the year in which the upgrades are completed. For personalized guidance, we recommend consulting with a tax professional.
Make the most of these incentives to boost your home’s energy efficiency and maximize your tax savings!
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Writer: Laura Wilson
