Having an energy efficient home could be a bigger advantage than just reducing your energy bill. We take a look at the energy efficient home improvement credit.
In the US, homes and commercial buildings consume approximately 40% of the total energy used each year. In addition, Americans waste up to $400 in energy expenses yearly due to outdated HVAC systems and drafts.
If you’re looking to reduce your carbon footprint and make your home more energy efficient, you’ll need to learn more about the Energy Efficient Home Improvement Credit. For 2023, there’s been a significant boost to how much money you can save.
Keep reading this guide to learn everything you need to know about the Energy Efficient Home Improvement Credit and how to get the most bang for your buck!
What Is the Energy Efficient Home Improvement Credit?
Before 2022, you could claim up to $500 for energy-efficient home improvements. With this credit, you could get money back on your taxes for installing specific types of energy-efficient devices in your house, such as:
- Central air conditioners
- Electric heat pumps
- Gas water heaters
- Specific energy-efficient appliances
However, $500 was the maximum lifetime amount you could claim, and the equipment had to be installed in your personal home.
In 2022, The Inflation Reduction Act was passed, bringing significant changes to the tax credit. The first change was that it was renamed the Energy Efficient Home Improvement Credit. The next major difference is that it increased to a $1,200 annual cap, and you can claim this amount every year until 2033. This allows you to get up to $12,000 back on your taxes over the lifetime of this credit.
With this new tax credit, you can get credits for making energy efficiency improvements on equipment like exterior doors, windows, insulation materials, central air conditioners, and more. You can also get up to $150 for getting a home energy audit. Be sure to visit the IRS website to learn more about the specifics of this credit.
How Can You Save Money With Home Energy Tax Credits?
If you’re tired of wasting energy using old appliances, you can use this credit to help transform your home into an energy-efficient home. You’ll also be able to save money and take advantage of this credit at the same time.
You’ll need to learn more details on the energy-efficient home improvements you should make, which include:
Home Energy Audits
One of the first things to do is get a home energy audit. A home energy audit involves an inspection and written report completed by an energy-certified auditor that identifies where you can make energy improvements.
They’ll also evaluate your heating and cooling system’s efficiency and check your insulation. You may be asked to provide past utility bills and report any problems you’ve noticed, such as drafty rooms.
Once this is complete, you’ll get an estimate of how much energy and money you can save once you make these improvements. Finally, don’t forget to claim your $150 tax credit for this assessment.
Replace Doors and Windows
Replacing your doors and windows can lead to huge savings. Many people have old drafty windows that impact their energy costs more than they realize. You’ll need to get ENERGY STAR-qualified doors and windows to ensure you can utilize the energy-efficient credit.
You can also find energy-efficient skylights to help minimize your cooling and heating costs.
If you’re on a tight budget, you can replace the weatherstripping on all exterior doors and caulk anywhere you notice drafts. Also, you can save money buying storm windows if you’re not ready to invest in new energy-efficient windows.
Improve Your Insulation
Effective insulation will slow down the heat that leaves your house during winter and keep the cool air inside during the warm summer months.
If your home doesn’t have wall insulation or your attic isn’t well insulated, you should consider upgrading your insulation. Your energy auditor can make recommendations about the insulation material you should choose.
Most of the time, fiberglass or mineral wool are good options. You should be able to install fiberglass insulation yourself if you’re comfortable. On the other hand, it’s best to hire a professional company to install foam or spray insulation.
Take the time to get estimates from different companies to find something that works with your budget.
Use Renewable Energy
One of the most effective ways to save money and turn your home into an energy-efficient home is by using renewable energy. The best part is that you can take advantage of the Residential Clean Energy Credit if you install solar panels in your home.
Solar panels also allow you to use other energy credits like the federal solar tax credit. For solar energy systems installed in 2023, you can claim 30% of your expenses, such as:
- Solar panels
- Labor costs
- Mounting equipment
- Energy storage devices
- Sales taxes
You can also get other tax credits and rebates when you use solar panels. Depending on your state, you’ll be eligible for different tax breaks. For example, some states offer sales tax exemptions on solar systems, while others allow you to exempt your solar panels from the property value of your home.
You might also qualify for net metering, which is a program many energy companies offer. When you sign up for this, any excess energy you generate will return to the grid. This will allow you to earn credits on your energy bill; in some cases, your utility company might owe you money.
Finally, most solar companies offer solar financing allowing you to make affordable monthly payments. The best part is you’ll own your system outright once you’ve finished making payments.
You can learn more at https://blueravensolar.com/virginia/ if you’re interested in getting solar panels for your home.
Start Making Your Home Energy Efficient Today
Now that you know more about the Energy Efficient Home Improvement Credit, you can begin making changes to your home today.
Do your research to determine what energy-efficient changes you’d like to make first. If you feel overwhelmed about the process, start by making small changes. Before you know it, you’ll be reducing your carbon footprint and turning your home into a green home.
To learn more helpful home energy efficiency tips, make sure to visit our blog today to read more informative articles!