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The Energy-Efficient Home Improvement Tax Credit Explained

Posted on: November 20, 2023

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Most homeowners realize that investing in sustainable energy is a worthwhile choice, not only to reduce energy expenses but to secure a brighter, greener future.

Still, high-efficiency HVAC systems can be expensive, making it difficult for many homeowners to cover installation costs. That’s where the Energy-Efficient Home Improvement tax credit comes to the rescue.

Through this program, homeowners can claim tax credits for qualifying heating and cooling systems they choose to install or replace in their homes.

We’ll discuss the Energy-Efficient Home Improvement tax credit in more detail, including who qualifies, when tax incentives are available, and how to prepare.

Contact us today to learn more and get started.

What Is the Energy-Efficient Home Improvement Tax Credit?

The Energy-Efficient Home Improvement tax credit is a special program designed to incentivize improvements to your home’s energy efficiency. If you make energy-efficient upgrades to your home, you may qualify for a tax credit of up to $3,200, depending on the system you install.

It’s important to note that there are limits on the allowable annual credit allotted to each family. The maximum credit you can claim each year is as follows:

When Will Energy-Efficient Home Improvement Tax Credits Become Available?

Homeowners can claim tax credits under the program beginning Jan. 1, 2023. The program applies to any installations or replacements made to existing homes from Jan. 1, 2023, to Dec. 31, 2032.

To redeem your tax credit, you must submit the appropriate tax filing form when you file your annual income taxes. Always consult with a knowledgeable tax professional to determine your eligibility and ensure you satisfy the minimum requirements.

Who Is Eligible for the Tax Credit?

All families throughout the San Marcos area are eligible to claim the Energy-Efficient Home Improvement tax credit as long as they satisfy these eligibility requirements:

  • Must be located in the U.S.
  • Must make home improvements to an existing primary residence, not a newly built property

Your primary residence is the place where you reside for the majority of the year. That means landlords and other property owners who don’t live in the home regularly may not be eligible.

How Much Will My Tax Credit Be?

The amount you receive for your tax credit varies depending on the system you choose to install. Here’s a breakdown of which systems qualify and the amount of tax credits homeowners can claim for each:

  • Central air conditioners & natural gas, propane, or oil furnaces & boilers: Must satisfy Consortium for Energy Efficiency (CEE) higher efficiency tier; qualifies for a tax credit up to $600.
  • Heat pumps & biomass stoves & boilers: Must have a thermal efficiency rating of at least 75%; qualified for a tax credit of up to $2,000 per year.

How Can I Prepare?

If you’re interested in reaping the benefits of the Energy-Efficient Home Improvement tax credit, there are a few things you can do to prepare:

  • Perform an energy audit: Trust a home energy auditor to thoroughly inspect your home and identify any energy efficiency upgrade opportunities.
  • Research eligible HVAC products: Due to the high volume of homeowners interested in claiming these tax credits, there could be shortages in available systems. Think ahead and find the unit you want well in advance.
  • Hire a knowledgeable contractor: Once you know which system you want installed, contact SM Air to schedule your installation.

Welcome in a new era of energy efficiency and sustainability in your San Marcos home.

Call SM Air at (512) 212-4777 to schedule your HVAC installation or replacement.