Here in our Chicago South Loop Tax Preparation office and our Homewood Il Tax Preparation office, we work with homeowners and real estate investors that are looking to save on their taxes. As we always say, when it comes to taxes, the best tax benefit is a tax credit, because you receive the amount on a dollar-for-dollar basis, versus tax deductions which only slightly reduce your taxable income. To say it another way, a $2,000 tax credit saves you $2,000 in taxes.
Energy Efficient Home Improvement Credit
Per the IRS, “if you make qualified energy-efficient improvements to your home after Jan. 1, 2023, you may qualify for a tax credit up to $3,200.” The Efficient Home Improvement Credits help homeowners pay for various types of energy efficiency improvements. The credit is 30% of energy property cost up to $1,200, and $2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers. Since more people will qualify for the energy-efficient improvements, we’ve outlined the details below.
- Exterior doors (energy star approved). Max 2 doors, $250 each, total credit amount $500. Example, door cost $1,300; 30% of $1,300 is $390. Although 30% of the cost is $390, the taxpayer can only get $250 of the $390 (per door up to $500).
- Exterior windows & skylights that meet Energy Star Most Efficient certification requirements; max credit amount $600.
- Electric panel upgrades. 30% of the cost up to $600.
- Home insulation. 30% of the cost up to $1,200.
- Central air conditioner. 30% of the cost up to $600.
- Furnace, heat pumps, water heaters, and hot water boilers. 30% of the cost.
- Home energy audits. 30% of the cost up to $150.
- Heat pumps, biomass stoves, or biomass boilers. $2,000 per year.
What if I earn a high income?
The great thing about this credit is that even those that earn higher incomes can take advantage of the credit (because there are no maximum income thresholds).
How many times can I claim this credit?
Although the Energy Efficient Home Improvement Credit has a $1,200 annual cap (with limits on specific items), you can claim the credit each year through 2033. Some homeowners are choosing to perform energy efficiency projects over several years, so that they can claim the credit each year.
Will this credit increase my tax refund?
It depends! The credit is nonrefundable, meaning if you don’t owe any tax, you will not receive the credit as a refund check. However, the credit can reduce what you owe, helping you to receive a refund of the income taxes withheld by your employer.
Can I carry this tax over to another year?
No, you can’t carry the credit over to a future tax year.
Who can claim the credit
Homeowners that use the property as their main residence, or a vacation home.
Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, or business compliance assistance please contact us online, or call our office at 855-743-5765. Do you owe the IRS, or your state back taxes? Do you have unfiled tax returns? Is the IRS threatening to garnish your paycheck, or levy your bank account? Are you ready to get back on track with the IRS? Howard Tax Prep LLC will help you get back on track with the IRS, get into a settlement, or setup a payment with the IRS. Reach out to us now! Make sure tojoin our newsletter for more tips on reducing taxes, and increasing your wealth.
Author information: Trudy M. Howard is a managing member of Howard Tax Prep LLC, a south loop of Chicago tax preparation and accounting office.
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