Energy Efficient Home Improvement Credit
Effective for 2023, the Inflation Reduction Act extended and expanded the tax credit for energy efficient home improvements. The credit increased to 30% of the cost of qualifying improvements, removed the lifetime limitation and added annual limits:
| Improvement | Annual limit |
|---|---|
| Combined credit for all energy efficient home improvements (general) | $1,200 |
| Residential energy property expenditures | $600 |
| Exterior windows and skylights (aggregate) | $600 |
| Exterior doors | $250 per door / $500 total |
| Heat pumps, heat pump water heaters, biomass stoves & boilers* | $2,000 |
| Home energy audits | $150 |
*The $1,200 and $600 limits above do not apply to this category.
Tax credit vs. rebate: what’s the difference?
Tax credit
Applied as a reduction of the income tax liability on your federal return, so it’s claimed when you file. It can reduce your tax to zero but not below, and it isn’t refundable. Any unused credit can be carried forward to reduce tax in later years.
Rebate
Offered by some states, local governments and utilities. Rebates must be applied for by you or your contractor directly with the agency offering them — and they put actual cash in your pocket when received.
This article is for general information only and is not tax advice for your specific situation. Tax laws change frequently; please contact Cyndi before acting on any of this information.