Podcast: Energy Efficient Home Improvement Credit

Energy Efficient Home Improvement Credit

Written by Jeff Dvorachek

September 6, 2022

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.

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Jeff Dvorachek
I joined Hawkins Ash CPAs in 1998. I am the partner-in-charge of the Manitowoc, WI, office and tax director for the firm. I have thorough experience providing tax services to individuals, commercial businesses, nonprofit entities and estates and trusts. I also provide compilation and review services. I lead the Tax Committee and am a member of the Information Technology Advisory Committee.

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