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If you’re a homeowner with an ongoing list of improvements you plan to make “someday,” get out your lists, because “someday” has arrived!
Tax credits for home energy efficiency upgrades and renewable energy systems can make these improvements more affordable than ever, while adding value, comfort, and efficiency to your home.
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If you made any of the eligible improvements to your home in 2023, make sure you claim them on your 2023 taxes. If doing your 2023 taxes has prompted your tax planning for next year, now is the time to review the list of eligible improvements and start planning your strategy.
See the list of available home energy tax credits. As a bonus, many of these will also lower your monthly utilities bills.
Maximize Your Tax Credits
But you don’t have to do it all at once.
Unless you have specific equipment (e.g., heating or cooling) that needs to be replaced immediately, you may want to create a multiyear strategy that:
- Maximizes total allowable tax credits, which are capped at $3,200 each year.
- Incorporates credits available through 2032.
- Allows for continuous improvement to your home’s comfort and efficiency.
- May be helpful to spread out large investments, such as windows. Be sure to discuss installation costs with your window installer when you consider whether to purchase windows and doors over multiple years.
As an example of a multiyear strategy, you could:
- In 2024, start with a home energy audit (🏠 tax credit of 30% of cost, up to $150).
- Then, based on the recommendations from the audit, address your home’s envelope, which is often the first step when making home efficiency improvements. To ensure that your home is as energy-efficient as possible before you invest in new heating or cooling equipment, try replacing (capped at $1,200 per year) your home’s:
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Insulation (🔥 tax credit of 30% of the cost)
- Inefficient exterior doors (🚪 30% of cost, up to $500, or $250 each)
- Drafty windows (🏚️ 30% of cost, up to $600).
- If you do need to consider replacing your heating, cooling, or water heating system to reach your yearly tax credit maximum of $3,200, you could install:
- In 2025, you could continue making home envelope improvements to again reach your cap of the $1,200 home envelope tax credit, again evaluating your home heating, cooling, and water heating needs, and purchasing equipment to maximize your tax credits for the year.
- In subsequent years, continue making more home energy upgrades, which could include an upgrade to renewable energy, installing:
- If you have or are planning to purchase an electric vehicle:
- First, explore tax credits available for vehicles (🚗 up to $4,000 for used or $7,500 for new)
- You may want to install a home electric vehicle charger at your home (🔌 30% of the cost, up to $1,000).
See What Tax Credits You Qualify For
As always, talk to your tax professional and review the IRS website to ensure you have the latest official guidance on tax credits, and review the tax credit requirements for each product carefully before making any purchase.
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