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Tax Credits for Homeowners under IRA

The Inflation Reduction Act (IRA) includes many new and revised tax credits available to homeowners for energy-efficient home improvements and clean energy expenditures.

The Nonbusiness Energy Property Credit offers taxpayers a nonrefundable personal tax credit for making a home more energy efficient. This program was extended through 2032 and renamed the Energy Efficient Home Improvement Credit. Starting in 2023, the credit will be equal to 30% of the costs of all eligible home improvements during the year. The $500 lifetime limit on the total credit amount will be replaced with a $1,200 annual limit.

For eligible homeowners using products placed in service after 2024, no credit will be allowed unless the manufacturer of any purchased item creates a product identification number for the product and the taxpayer claiming the credit includes the number on their tax return for that tax year.

The Residential Clean Energy Credit aids taxpayers in paying for residential alternative energy-efficient equipment. Formerly named the Residential Energy Efficient Property Credit, the program was previously scheduled to expire at the end of 2023 but has been extended through 2024. The amount of credit for 2023 to 2032 – 30%, for 2033 – 26%, and for 2034 – 22%.

The eligible alternative energy equipment includes solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property.

For more detailed information about these tax credits, visit this Fact Sheet provided by the IRS.