Tax season is the perfect time to look for ways to save money, and if you’ve made energy-efficient upgrades to your home, you might qualify for valuable federal tax credits. While we’re not tax experts, we’d like to make San Antonio homeowners aware of and provide some general information about the federal tax credit for energy-efficient home improvements. This credit rewards homeowners who invest in eco-friendly upgrades, helping both their wallets and the environment.
Who Qualifies?
This tax credit applies to most American homeowners who made energy-efficient upgrades to their primary residence, though, for certain improvements, renters or people with a secondary residence can also claim some credit. Energy improvements made in new construction homes or rental and investment properties that the taxpayer does not reside in do not qualify.
Homeowners can qualify for the upgrade program by completing their improvements between January 1, 2023 and December 31, 2032. Starting this year, taxpayers are now required to report the PIN for each item, which must be produced by a qualified manufacturer, on their tax return to be eligible for the credit. Insulation and air sealing materials are the only items excluded from this requirement.
What Does It Offer?
The tax credit allows homeowners to claim up to 30% of the cost of qualifying energy-efficient improvements, with the potential to receive a total tax credit up to $3,200 per year eligible improvements are made, with annual limits per category and item type.
Here’s a quick breakdown:
- Receive up to $2,000 on the following qualifying items:
- Heat pump
- Heat pump water heater
- Biomass stoves or boiler
- Receive up to $1,200 on other energy efficient home improvements including qualifying:
- Natural gas or propane water heaters: up to $600 per item
- Natural gas or propane furnaces: up to $600 per item
- Efficient central air conditioners: up to $600 per item
- Exterior windows: a cap of $600
- Exterior doors: $250 per door, with a cap of $500
- Insulation & air sealants: no per item limit, but cannot exceed the $1,200 category limit
- Professional home energy audit: up to $150
Please note that most of these items allow you to include the cost of installation labor when calculating the 30% cost of qualifying upgrades. Labor costs for all building envelope improvements including exterior doors, windows, insulation, and air sealing materials, cannot be included in the tax credit calculation.
The tax credit offered is non-refundable, so while it lowers your tax liability, it does not function as a refund when it goes beyond what you owe. Excess credit from one year cannot be applied to future years.
What Upgrades Qualify?
If you’ve installed any of the following ENERGY STAR-certified upgrades during the tax year, you may be eligible for the tax credit:
- High-efficiency A/C units and furnaces
- Heat pumps
- Water heaters (including heat pump water heaters)
- Insulation, windows, and doors designed to reduce energy loss with an expected lifespan of at least 5 years.
The ENERGY STAR website contains a full list of qualified products and tax professionals can provide additional guidance.
How to Claim the Tax Credit
To make sure you receive your tax credit, follow these steps:
- Keep All Documentation – Save receipts, installation records, and product labels showing ENERGY STAR certification.
- Fill Out IRS Form 5695 – This form, used for Residential Energy Credits, should be included when filing your tax return.
- Consult a Tax Professional – While claiming the credit is straightforward, a professional can help maximize your savings and ensure you meet all requirements.
Plan Ahead for Future Savings
Home upgrades present an excellent opportunity to make energy efficiency investments right now.
San Antonio homeowners interested in upgrading their HVAC or plumbing systems should contact the team at North East Air Conditioning, Heating & Plumbing to discover eligible energy-efficient options. Homeowners who choose a high-efficiency A/C unit or heat pump water heater will see benefits now through tax credits and in the future through lower energy bills.
Don’t Miss Out!
Remember that tax season only comes once a year, so to enjoy the potential benefits of this potential credit and claim savings from your energy-efficient improvements, be sure to collect all relevant documents now.
For more information about the tax credit and the qualifications surrounding it, visit the IRS website. And for more information on energy-efficient improvements for your home, reach out to the professionals at North East Air Conditioning, Heating & Plumbing. We can work with you to see which upgrades make the most sense for your home and lifestyle.
