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January 17, 2025

Home Energy Credits for the 2024 Tax Year

Original Source Paul Jandl - Tax Senior

As homeowners look for ways to reduce their energy bills and contribute to a greener planet, the U.S. government offers incentives through the Energy Efficient Home Improvement Credit or the Residential Clean Energy Credit. For the 2024 tax year, these credits can help offset the costs of making energy-efficient upgrades to your home. Here’s a comprehensive guide to understanding and maximizing these benefits.

The Energy Efficient Home Improvement Credit is designed to encourage homeowners to invest in energy-saving improvements. The improvements must be made to the home you already own, not a new one. This credit can be claimed for a variety of upgrades, including the following:

  1. Insulation: Adding or upgrading insulation in your home can significantly reduce heating and cooling costs.
  1. Windows and Doors: Installing energy-efficient windows and doors helps maintain indoor temperatures and reduces energy consumption.
  1. Heating and Cooling Systems: Upgrading to energy-efficient heating, ventilation, and air conditioning (HVAC) systems can lead to substantial energy savings.
  1. Water Heaters: Energy-efficient water heaters are also eligible for the credit.
  1. Home Energy Audits: a comprehensive evaluation of your home’s energy use.

The credit amount varies depending on the type of improvement:

  • Insulation, Windows, and Doors: Homeowners can claim 30% of the cost of these improvements, up to a maximum of $1,200 per year. $250 per door, $600 for exterior windows and skylights, and $150 for a home energy audit.
  • HVAC Systems and Water Heaters: Specific credit amounts apply to different types of systems.  You may claim up to $2,000 per year for qualified heat pumps furnace, heat pump water heaters, biomass stoves/boilers.

There is no overall limit on the total amount of this credit you can claim over your lifetime. You can claim the maximum allowable credit each year for eligible improvements or energy-efficient installations until 2033. However, starting in 2025, you can only claim the credit for each qualifying item if it was made by a certified manufacturer and you include the product’s identification number (PIN) on your tax return. These credits are nonrefundable, meaning it can only reduce your tax liability to zero, and any excess credit can’t be carried forward to future years.

Be sure to check if these appliances or improvements to your home meet the applicable Energy Star requirements.

The Residential Clean Energy Credit allows homeowners to claim 30% of the costs of new, qualified clean energy property installed in your residential property. This credit is nonrefundable, meaning it can reduce your tax liability to zero, but any excess credit can be carried forward to future years. This includes:

  • Solar Electric Panels
  • Solar Water Heaters
  • Wind Turbines
  • Geothermal Heat Pumps
  • Fuel Cells
  • Battery Storage Technology (beginning in 2023)

Not all these improvements are eligible at face-value, however. Here are the extra details that these clean energy alternatives are required to incorporate in their installation:

  1. New Equipment: They must be new and not previously used.
  1. Installation Date: They must be installed and placed in service after December 31, 2022.
  1. Residential Use: They must be installed in a home you own and use as your primary residence. Second homes and vacation homes may also qualify, but rental properties do not.
  1. Qualified Expenses: The credit applies to the cost of the solar panels or wind turbines, as well as labor costs for onsite preparation, assembly, or original installation, and for piping or wiring to connect the system to your home.
  1. Certification: The solar water heater must be certified by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by your state.
  1. Installation Date: The system must be installed and placed in service after December 31, 2022.
  1. Residential Use: The system must be installed in a home you own and use as your primary residence. Second homes and vacation homes may also qualify, but rental properties do not.
  1. Qualified Expenses: The credit applies to the cost of the solar water heater, as well as labor costs for onsite preparation, assembly, or original installation, and for piping or wiring to connect the system to your home.
  1. Solar Energy Use: At least half of the energy used to heat the water must come from solar energy.
  1. Energy Star Certification: The geothermal heat pump must meet the Energy Star requirements in effect at the time of purchase.
  1. Installation Date: The system must be installed and placed in service after December 31, 2022.
  1. Residential Use: The system must be installed in a home you own and use as your primary residence. Second homes and vacation homes may also qualify, but rental properties do not.
  1. Qualified Expenses: The credit applies to the cost of the geothermal heat pump, as well as labor costs for onsite preparation, assembly, or original installation, and for piping or wiring to connect the system to your home.
  1. Efficiency and Capacity: The fuel cell system must have a minimum electricity-only generation efficiency of 30% and a capacity of at least 0.5 kilowatts (kW).
  1. Installation Date: The system must be installed and placed in service after December 31, 2022.
  1. Residential Use: The system must be installed on a home you own and use as your primary residence. Second homes and vacation homes do not qualify for the fuel cell credit.
  1. Qualified Expenses: The credit applies to the cost of the fuel cell system, as well as labor costs for onsite preparation, assembly, or original installation, and for piping or wiring to connect the system to your home.
  1. Credit Limit: The credit is limited to $500 for each half kilowatt of capacity. If more than one person lives in the home, the combined credit for all residents cannot exceed $1,667 for each half kilowatt of fuel cell capacity
  1. Installation Date: The system must be installed and placed in service after December 31, 2022.
  1. Capacity: The battery must have a capacity of at least 3 kilowatt-hours (kWh).
  1. Residential Use: The system must be used in a residential setting, either as part of a new installation or added to an existing renewable energy system.
  1. Domestic Content: For an additional 10% tax credit, the system must meet specific domestic content requirements, ensuring that materials and manufacturing processes are sourced in the United States

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