Introduction
Are you a homeowner? Did you install any new systems in your home during the past year (such as a water heater, skylight, a biomass system, new door, etc.)? Do you need to do this in the future? If the answer is yes to either of these questions, you may be able to take a tax credit for up to 30% of your expenses: here’s how.
What is the Residential Clean Energy Tax Credit?
The Residential Clean Energy Tax Credit is a federal incentive designed to encourage homeowners to invest in energy-efficient improvements. By making these upgrades, not only do you contribute to a greener environment, but you also benefit from significant tax savings. The credit covers 30% of the cost of qualifying energy-efficient systems installed in your home, essentially a “30% off” coupon from Uncle Sam every year you install any energy-efficient system!
Who Can Claim the Credit?
To be eligible for the credit, you must be a homeowner who has installed qualifying energy-efficient systems in your primary residence. The home must be in the United States and used as your main home for most of the year. Unfortunately, landlords and property owners who do not live in the house cannot claim this credit.
How Much Can You Claim?
The credit allows you to claim 30% of the total cost of qualifying energy-efficient improvements, with certain caps. For example, you can claim up to $1,200 per year for energy-efficient property costs and certain home improvements, with specific limits for items like exterior doors ($250 per door, up to $500 total), windows and skylights ($600), and home energy audits ($150). For qualified heat pumps, water heaters, biomass stoves, or biomass boilers, the cap is higher at $2,000 per year. Taxpayers claimed more than $7 billion in credits throughout 2024!
How do I Claim it?
Mention it to your tax preparer - they will file Form 5695 with your 1040 tax return to reduce your tax liability!
Conclusion
Taking advantage of the Residential Clean Energy Tax Credit is a smart way to save money while making necessary home improvements. As you prepare your taxes this season, consider whether any recent home improvements might qualify for this valuable credit by asking your accountant if you would qualify. If you are thinking about making home improvements this coming year, be sure to reach out to your accountant before starting to see how planning to do so could qualify. Or what additional items you would need to do to be eligible for this benefit.
For more ways to save money, reduce tax liability, and specific financial advice tailored to your situation, visit the Whitaker Myers Wealth Management website and book a meeting with a financial advisor today! We also have a tax professional on hand to help answer questions such as these and help you save during tax season.