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  • Energy Efficient Tax Credit: An Inflation Reduction Act 2022 Benefit

    Posted by Natalie Paris on February 21, 2024 at 9:29 am

    The Inflation Reduction Act of 2022 was signed into law with the goal of addressing economic challenges and encouraging businesses and homeowners to adopt more “green” energy practices. With this bill comes an important provision: the Home Energy Efficient Tax Credit. This credit incentivizes homeowners to make energy-efficient improvements to their homes. In this blog post, we’ll explore how the Home Energy Efficient Tax Credit works, who can qualify, what potential amounts and expenses there are, and how you can apply to claim this tax credit.

    What is the Home Energy Efficient Tax Credit Under the Inflation Reduction Act of 2022?

    The Home Energy Efficient Tax Credit is a financial incentive provided to homeowners under the Inflation Reduction Act of 2022. This credit gives homeowners the opportunity to receive tax credits when they invest in energy-efficient home improvements, such as solar or wind energy, energy efficient heating and cooling, etc. These improvements aim to make homes more sustainable and “green,” reducing energy consumption and the costs associated with it.

    Who Can Qualify for the Home Energy Efficient Tax Credit?

    In order to qualify for the Home Energy Efficient Tax Credit, there are certain criteria that homeowners must meet. For the most part, if individuals make eligible energy-efficient improvements to their primary residence, they will qualify.

    Renters and those that make improvements to a second home used as a residence may also qualify. If you make improvements to a home that is never used as a residence, you will not qualify.

    It’s important to note that you can ONLY claim the credits for the year in which the improvements were installed.

    What Are the Qualifying Credit Amounts and Expenses?

    The qualifying credit amounts and eligible energy-efficient expenses are directly related to the type of improvement made.

    For home clean electric products, such as solar electricity, fuel cells, wind turbines, and battery storage, the tax credit is 30% of the cost.

    For heating, cooling, and water heating, such as heat pumps, heat pump water heaters, solar water heating, efficient air conditioners and heating equipment, etc, the tax credit is anywhere from 30% of the cost up to a maximum of $600 or $2,000 (depending on the improvement).

    Other energy efficient improvements may also qualify for at least 30% of the cost such as insulation materials, exterior doors, windows, and skylights, home electric vehicle chargers, etc.

    As a homeowner, be sure to carefully review the legislation and rules surrounding these improvements and tax credits in order to maximize your financial benefits with the Home Energy Efficient Tax Credit.

    You can learn more on the specifics, qualifying improvements, percentages, and limits on the energy.gov website.

    How Do You Claim the Home Energy Efficient Tax Credit?

    In order to claim the Home Energy Efficient Tax Credit, there is a process you must follow.

    DOCUMENT YOUR IMPROVEMENTS

    You must keep a detailed record as proof of the energy-efficient improvements made to your home and residence. Keep all relevant documents, such as quotes, receipts, and invoices.


    ENSURE ELIGIBILITY

    Make sure to double check that the energy efficient improvements made quality for the tax credit. Again, check the specific requirements and tax credit amounts and expenses to ensure you are eligible.


    COMPLETE THE NECESSARY FORMS ALONG WITH DOCUMENTATION

    In order to apply for and claim this tax credit, you must file Form 5695, Residential Energy Efficient Tax Credits Part II with your tax return. You must claim the credit in the tax year that the improvement was installed (not purchased). Be sure to consult your tax professional to ensure the forms have not changed.

    Attach the necessary documents (quotes, receipts, and invoices) to your form when submitted. This is a key step for ensuring the expenses associated with the improvements are considered and matched up with the potential available credit.

    In conclusion, the Home Energy Efficient Tax Credit under the Inflation Reduction Act of 2022 is a great opportunity for homeowners to make energy efficient improvements while being rewarded with financial and tax-saving incentives.

    Natalie Paris replied 1 month, 3 weeks ago 1 Member · 0 Replies
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