The Inflation Reduction Act of 2022 offers tax breaks for homeowners who make their homes more energy efficient and reduce fossil fuel usage. These tax breaks, known as the section 25C energy efficient home improvement credit, are administered by states based on guidelines issued by the Department of Energy. The savings vary depending on where you live, and the amount of the tax breaks decreases as income increases. The credit is equal to 30% of the cost of qualified improvements, with a dollar limit based on the type of improvement and income level.
To qualify for the new tax credit, homeowners must first have a comprehensive home energy audit that meets IRS guidance issued in September 2023. The audit must identify cost-effective energy efficient improvements and include estimates of both energy and cost savings for each improvement. The auditor must be certified to conduct a home energy audit and qualified under section 25C of the tax code. Even if no improvements are made, homeowners can receive a credit of 30% of the cost of the audit, up to a maximum credit of $150.
In addition to the dollar limit on each type of improvement, there is also an annual limit on the total credit per taxpayer which varies based on income level. Some taxpayers may need to spread improvements over several years to maximize the tax benefits. To help homeowners track and plan improvements, various apps like Green Door and Rewiring America’s Inflation Reduction Act calculator have been developed. These apps can assist in understanding and navigating the complex tax breaks and limits associated with the Act.
For more information on the tax credit under the Inflation Reduction Act of 2022, homeowners can visit the IRS website and search for “credit and deductions under the Inflation Reduction Act of 2022” or access the specific page on the IRS website for detailed information. The tax breaks provided by the Act aim to incentivize energy efficiency and reduce fossil fuel use in homes, ultimately leading to environmental benefits and cost savings for homeowners. The Act is intended to encourage more sustainable practices and contribute to overall efforts towards reducing carbon emissions and combating climate change.