Key Provisions for 2023 + to maximize your home renovation projects!

IRC 25C now allows you to receive a $1200 per YEAR tax credit!

This code section focuses on your personal home and NOT rental properties!

The credit is equal to 30% of what you spent on qualified energy efficiency improvements, residential energy property, and home energy audits during the year
 

Qualified energy efficiency improvements:

This primarily refers to home envelope improvements. 

This includes various types of insulation, energy-efficient windows, and energy-efficient exterior doors.

To qualify for the credit, these improvements to the building envelope need to meet certain criteria:

Windows – must meet EnergyStar most efficient certification requirements.

Exterior doors – must meet applicable Energy Star requirements.

Insulation – must meet prescriptive criteria from a recent International Energy Conservation Code.

Residential energy property

So what is residential energy property that qualifies towards your $1200 annual credit?

• Heat pumps, central air conditioners, water heaters, furnaces, and boilers as long as the appliance meets the highest efficiency tiers (see below for unique carve out)
• Biomass stoves and boilers 
• Certain energy-efficient oil furnaces and hot water boilers
• Cost to upgrade a panel to at least 200 amps panels

Home Energy Audits - capped at a maximum of $150 per taxpayer each year.

NOTE - labor costs can be included here!

Bonus:

The $1,200 annual limit and the $600 residential energy property limit don’t apply to heat pumps.

Installation of heat pumps at your home get their own $2,000 tax credit!

Be Strategic!

Since this credit is renewable each year, we encourage you to strategically invest in home improvements across two years.  Let’s walk through an example:

You decide it is time to stop letting heat leak out the windows and want to install new windows in your home for $5,000.

Option 1:  You hire the contractor to install the windows in November.  He completes installation on 12/15.  When you file your taxes, we inform you that you have a nice $1200 credit.  Not bad.

Option 2:  You hire the contractor to install the windows in December.  He completes the lower level portion on 12/15 and he invoices you + you pay the bill on 12/31.

In January, he completes the upper levels and invoices you the remainder of the $5000.

By spreading across tax years, you now have a $2400 tax credit!  Your total out of pocket cost is now only $2600!