It’s the ultimate win-win for green-minded individuals: Reduce your carbon footprint and save money on utility bills.
But home improvements that increase energy efficiency don’t just result in lower heating and electric costs, they also save you money in the form of tax credits.
These incentives, put in place by the United States government, allow homeowners to make environmentally responsible home improvements while also reducing the amount of taxes owed come tax season.
Upgrades run the gamut, from installing energy-efficient windows or upgrading insulation to installing solar panels. By implementing these changes, homeowners can significantly decrease their energy usage, lower greenhouse gas emissions, and, ultimately, contribute to a greener future.
Federal Tax Credits
To encourage homeowners to embrace energy-efficient practices, the U.S. government offers federal tax credits as incentives.
Several tax credits are available for specific energy-efficient home improvements. Here are some of the most notable ones:
Residential Renewable Energy Tax Credit: Allows homeowners to claim a credit of up to 26% of qualified expenditures for solar panels, solar water heaters, wind turbines, and geothermal heat pumps.
Credits can be claimed for both primary residences and second homes, with no maximum limit.
Non-Business Energy Property Tax Credit: Offers a credit of 10% of the cost of qualified energy-efficient improvements, including insulation, windows, doors, and roofs, up to a maximum of $500.
Certain improvements, such as biomass stoves, HVAC systems, and water heaters, have specific credit limits.
Electric Vehicle Tax Credit: Provides a credit of up to $7,500 for the purchase of qualified electric vehicles (EVs).
State and Local Tax Incentives
In addition to federal tax credits, many states and local governments offer their own incentives to promote energy-efficient home upgrades. These incentives can include rebates, grants, property tax exemptions, and low-interest loans. It's essential to research specific programs available in your area to maximize the benefits of going green.
Don’t Forget to Document!
To claim energy-efficient tax credits, homeowners must complete the appropriate IRS forms and submit them with their annual tax return. The specific forms required may vary depending on the credit being claimed. It's absolutely crucial to keep receipts and documentation of all eligible expenditures as proof of eligibility.
With federal tax credits and additional incentives provided by states and local governments, homeowners have a unique opportunity to reduce their environmental impact and enjoy financial benefits at the same time. By taking advantage of these tax credits, you can energize your home and make a positive impact on the planet, one home upgrade at a time.