The Inflation Reduction Act (IRA) includes incentives that reward homeowners and builders for installing high-efficiency HVAC equipment.
Energy Efficient Home Improvement Credit (25C) in 2023
In 2022, the expired Energy Efficient Home Improvement Credit (25C) was reintroduced and extended to the end of 2022 through the Inflation Reduction Act of 2022 (IRA). At the same time, 25C was extended for eligible investments made from 2023 through 2032.
Though the benefits of 25C are known, please be aware that the criteria and filing process are still not finalized by the IRS.
Major Changes for Tax Year 2023 and Beyond
Expenses related to qualifying home energy audits paid or incurred during the year will also qualify.
The energy efficiency standards that investments must meet to qualify will change and update automatically in the future. Starting in 2025, taxpayers must report their products’ identification numbers to claim the credit.
Investments in roofs will no longer qualify, but certain investments in biomass stoves and airsealing material placed in service in 2023 or later will. Improvements to, or replacement of, panelboards, sub-panelboards, branch circuits, or feeders also qualify beginning in 2023.
Expenditures made for homes the taxpayer uses as a residence, whether or not as their primary residence, will qualify.
- No lifetime limits.
- $1,200 for the entire credit for most taxpayers.
- $600 for any single energy property item.
- Not with standing these limits, the credit for qualifying expenditures on biomass stoves or water heaters and/or heat pumps powered by electricity or natural gas is capped at $2,000.
- $600 on windows.
- $150 for home energy audits.
- $500 for exterior doors in the aggregate, and $250 per exterior door.
Read More About Residential Energy Tax Credits: Changes in 2023
