The value of energy efficiency tax credits rose dramatically with the passage of the Inflation Reduction Act.
As Donald Trump prepares to take office, the future of clean energy tax breaks remains uncertain. However, the tax credits established by the Inflation Reduction Act are still fully in effect for any energy efficiency improvements made in 2024.
Adding alternative energy to your home provides the biggest tax break, but simple improvements to oil or gas appliances or structural items like insulation, windows and doors can also give you money back this tax season. There's also a tax credit for installing alternative energy charging stations for electric vehicles in your home.Â
Read on to learn all the current tax credits for energy improvements and how to claim them on your taxes. For more tax tips, learn how IRS changes will impact gig workers and others who are paid by Venmo and PayPal.
Which home energy improvements are eligible for tax credits?
The IRS allows two main tax credits for improving energy efficiency at home -- the energy efficient home improvement credit and the residential clean energy property credit.Â
The first credit deals with improvements to energy efficiency in your home, while the second focuses on alternative energy projects like solar panels or wind turbines. To qualify for either credit, home improvements must be made to a primary residence.Â
The energy-efficient home improvement credit
Formerly called the nonbusiness energy property credit, the energy-efficient home improvement credit now provides taxpayers 30% back (with limits) for the installation of certain Energy Star-certified devices or other energy improvements like new insulation, doors and windows.
Installing a heat pump could give you an extra $2,000 back on your taxes.
There was previously a $500 lifetime limit on the credit, but starting in 2023, the IRA changed the limit on the energy-efficient home improvement credit to $1,200 annually. Also, water heaters, heat pumps, biomass stoves and biomass boilers have a completely separate credit limit of $2,000, so you can get up to $3,200 back yearly for major energy-efficiency improvements.
Here are the current tax credit amounts you can claim on your tax return for Energy Star-certified devices installed in 2024:
Tax credits for home energy improvements in 2024
| Energy Star-certified product | Energy efficient home improvement credit |
|---|---|
| Energy-efficient furnace or air conditioner | 30% of cost, up to $600 |
| Energy-efficient water heaters | 30% of cost, up to $600 |
| Electric panel or circuit upgrades | 30% of cost, up to $600 |
| Heat pumps and heat pump water heaters | 30% of cost, up to $2,000 |
| Biomass stoves and biomass boilers | 30% of cost, up to $2,000 |
| Insulation | 30% of cost, up to $1,200 |
| Windows and skylights | 30% of cost, up to $600 |
| Exterior doors | 30% of cost, limit of $250 per door or $500 total |
| Home energy audits | 30% of cost, up to $150 |
The residential clean energy credit
Changes to the residential clean energy credit started in 2022 and continue until 2033. You can get a 30% tax break for expenses related to qualified improvements that use alternative power like solar, wind, geothermal or biomass energy.
(The tax credit had dropped to 26% in 2021, but the IRA pushed it back up to 30% from Jan. 1, 2022 until Jan. 1, 2033.)
Property that can qualify for the residential clean energy credit includes:
- Solar electricity
- Solar water heating
- Wind turbines
- Geothermal heat pumps
- Biomass fuels
- Fuel cells
There's no limit on the residential clean energy credit except for fuel cell property, which is restricted to $500 for each one-half kilowatt of capacity.
What about the EV charging station tax credit?Â
Another credit impacted by the Inflation Reduction Act is the alternative fuel vehicle refueling property credit, a tax break for homeowners who install green energy charging stations. The credit expired at the end of 2021, but it was revived for the 2022 tax year and extended until the end of 2032.Â
Electric vehicle charging stations qualify for the credit, as well as fueling stations that primarily use ethanol, natural gas, liquefied petroleum gas or hydrogen.
If you installed an electric vehicle charging station or another alternative fuel source at your home in 2024, you could qualify for 30% back for hardware and installation costs, up to a maximum of $1,000.Â
How do I claim energy efficiency tax credits on my 2024 taxes?
The best tax software will help identify all of your tax credits, usually with a question-and-answer process, and automatically plug them into your tax return. If you complete your return without answering questions about home improvements, be sure to search for those credits or use the software's help section to identify how to claim them.
For filing your taxes on paper, Form 5695, "Residential Energy Credits" takes care of both the residential clean energy credit (Part I) and the energy-efficient home improvement credit (Part II). Form 8911 should be used to claim the alternative fuel vehicle refueling property credit.
