The recently signed Inflation Reduction Act included a lot of green provisions. This week I want to talk about the changes to the Energy-Efficient Home Improvement Credit for 2023.
HOW DOES THE CREDIT WORK RIGHT NOW?
- For the last number of years, including 2022, there was a 10% tax credit for qualified energy-efficiency improvements such as the installation of insulation, windows, doors, roofing, etc.. The credit was limited to between $200 – $500 over a person’s lifetime, so although there was a credit, it was not very robust and many taxpayers have already used up their lifetime limit.
HOW DID THE CREDIT CHANGE?
- Beginning in 2023, there were a lot of changes made to the credit and how it is calculated.
LET’S FIRST TALK ABOUT HOW THE CALCULATION CHANGED?
- The tax bill increased the credit rate from 10% to 30% of the cost of eligible expenses.
- It also increased the amount of the credit to $1,200.
IS THERE A CREDIT LIMIT DEPENDING ON WHAT YOU DO?
- There is. The maximum credit is
- $250 for an exterior door and $500 for all doors
- $600 for windows, air conditioners, and certain furnaces/boilers
- $150 for home energy audits
- So if you do all three, you will get the maximum $1,200 credit.
IS IT STILL A LIFETIME CREDIT?
- Not any more, now the maximum credit can be taken each year.
DO ALL IMPROVEMENTS QUALIFY?
- Unfortunately no. In order to qualify, the improvements must meet an energy rating depending on the improvement.
IS THE CREDIT STILL LIMITED TO A PERSONAL RESIDENCE ONLY?
- No, the credit was also expanded to include a personal residence and vacation/second property.
Be sure to talk to one of our professionals if you have any questions about Energy-Efficient Home Improvement Credit.