ENERGY EFFICIENT HOME IMPROVEMENT TAX CREDITS
Barry Weller
by Barry L Weller, EA
The energy efficient home improvement credit is now divided into two sections to differentiate between qualified energy efficiency improvements and residential energy property expenditures. To be able to take the credits, you must have made energy saving improvements to your main home located in the United States. Your main home is generally the home where you live most of the time. A temporary absence due to special circumstances, such as illness, education, business, military service, or vacation, won't change your main home. A home is where you lived and can include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.
For the energy efficient home improvement credit, the lifetime limitation has been replaced by an annual credit limit of 30% credit, up to a maximum for each type of energy efficient home improvement property. The different property/products are • Insulation material or air sealing material or systems, • Exterior doors, • Windows and skylights, • Central air conditioners, • Natural gas, propane or oil water heaters, • Natural gas, propane or oil furnaces or hot water boilers,
• Improvements or replacement of panelboards, sub panelboards, branch circuits or feeders, and • Home energy audits.
Insulation Tax Credit: This credit is 30% of the product cost up to $1,200 maximum credit. Eligible products are the typical bulk insulation products, such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place. Products that air seal (reduce air leaks) can also qualify, as long as they come with a Manufacturers Certification Statement. **
Some examples of products that air seal are * Weather stripping, * Spray foam (in a can) designed to air seal, * Caulk designed to air seal, * House wrap.
**Manufacturer’s Certification Statement is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records.
Windows, Skylights and Doors Tax Credit: This credit is 30% of the product cost up to $600 maximum credit for windows and $250 for doors (2 door maximum). Eligible products are exterior residential windows, skylights or doors that meet the Energy Star Most Efficient criteria.
Air Source Heat Pumps Tax Credit: Heat pumps are either ducted or non-ducted (mini-splits). Eligibility depends on whether you live in the north or south.
Ducted :
South: All heat pumps that have earned the ENERGY STAR label
North: Heat pumps designated as ENERGY STAR Cold Climate that have an EER2 > 10
Ductless (mini-splits):
South: ENERGY STAR certified heat pumps with SEER2 > 16 EER2 > 12 HSPF2 > 9
North: ENERGY STAR Cold Climate heat pumps with SEER2 > 16 EER2 > 9 HSPF2 > 9.5
Water Heaters (Natural Gas) Tax Credit: This credit is 30% of the project cost up to $600 maximum credit. Eligible products for gas storage water heaters must be an ENERGY STAR certificed model with >0.81 UEF for tanks less than 55 gallons and >0.86 UEF for tanks greater than or equal to 55 gallons. Tankless gas water heaters are also eligible and must be an ENERGY STAR model with >0.95 UEF.
Geothermal Heat Pumps Tax Credit: For this credit, existing home and new construction qualify. Also, principal residences and second homes qualify. Rentals do not qualify.
Equipment which (1) uses the ground or ground water as a thermal energy source (to heat), or as a thermal energy sink (to cool) a home, and (2) is ENERGY STAR certified.
30% for property placed in service after December 31, 2021, and before January 1, 2033
26% for property placed in service after December 31, 2032, and before January 1, 2034
22% for property placed in service after December 31, 2033, and before January 1, 2035
Barry L Weller, EA is the president of Barry Weller & Associates with offices at 19 N Reading Ave, Boyertown, PA 19512 Phone (610) 367-8280 He is an enrolled agent, licensed to represent taxpayers before the IRS.