Tax Season Superpowers: How Renewable Energy and Efficiency Can Fuel Your Savings

Here’s a summary of the two main categories of energy credits for taxes in 2023:
1. Residential Clean Energy Credit:
Applies to: Installation of solar panels, wind energy systems, geothermal heat pumps, fuel cells, and battery storage technology.
Credit amount: 30% of the cost of qualified equipment and installation, up to a maximum credit of $2,000 per year (through 2032).
Additional notes: The credit percentage will gradually decrease to 26% in 2033 and 22% in 2034.

2. Energy Efficient Home Improvement Credit:
Applies to: Installation of certain energy-efficient improvements, such as windows, doors, insulation, roofs, furnaces, and air conditioners.
Credit amount: 30% of the cost of qualified improvements, up to a maximum credit of $1,200 per year (through 2032). Some specific improvements have individual annual credit limits, like $250 per door and $600 for windows.
Additional notes: There are no lifetime limits on this credit, unlike the previous version in 2022.

Here are some helpful resources for you to learn more:
IRS website: https://www.irs.gov/forms-pubs/about-form-5695
Energy Star website:
https://www.energystar.gov/about/federal_tax_credits/non_business_energy_property_tax_credits
TaxSlayer Pro blog: https://support.taxslayer.com/hc/en-us/articles/360019678792-What-is-the-Residential-Energy-Credit-The-Inflation-Reduction-Act-of-2022-

Remember, you can only claim energy credits for improvements installed or equipment purchased after January 1, 2023.
I hope this information is helpful! Let me know if you have any other questions.

Qualified energy-efficient improvements are specific upgrades made to your home that can help you save energy and, as of 2023, also qualify for some generous tax credits. These credits are available through two main programs: the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit.
Here’s a breakdown of the types of improvements that qualify for each program:
Residential Clean Energy Credit:
Solar panels and battery storage: This includes both photovoltaic (PV) and solar thermal systems, as well as eligible battery storage technologies that complement renewable energy systems.
Wind energy systems: Small wind turbines installed for residential use can qualify.
Geothermal heat pumps: These systems extract heat from the ground to provide year-round heating and cooling.
Fuel cells: These appliances generate electricity and heat from hydrogen or other fuels.

Energy Efficient Home Improvement Credit:
Windows and doors: Upgrading to Energy Star-certified windows and doors can significantly reduce heat loss and gain, especially when replacing older models.
Skylights: Similar to windows, properly installed Energy Star-certified skylights can provide natural light while maintaining energy efficiency.
Insulation: Adding or upgrading insulation in attics, walls, and basements can dramatically improve your home’s thermal performance.
Roofs: Certain metal and asphalt roofs with reflective coatings can qualify, as can roof products like cool shingles and radiant barriers.
Heating and cooling systems: New Energy Star-certified furnaces, air conditioners, and heat pumps can be eligible, with some specific efficiency requirements.
Water heaters: Replacing standard water heaters with more efficient models like heat pump water heaters or solar water heaters can qualify.

It’s important to note that these are just some general categories, and specific qualifications and limitations may apply to each type of improvement. For the most up-to-date information and detailed lists of eligible products, you can visit the following resources:
IRS website: https://www.irs.gov/forms-pubs/about-form-5695
Energy Star website:
https://www.energystar.gov/about/federal_tax_credits/non_business_energy_property_tax_credits

Remember, consulting a qualified contractor or tax professional can help you determine which improvements are right for your home and ensure you can maximize your potential tax credits. Drenen Financial Services can help clarify and maximize your tax savings. With our knowledge and training we can help you execute strategies to help you maximize these credits. Call now for a free consultation 413-569-0015.

Not everyone can claim the energy tax credits, but a good number of people can take advantage of them! Here’s the breakdown of who qualifies:
Primary residence owners: This is the most straightforward case. If you own and occupy your primary residence in the United States, you can generally claim both the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit for improvements made to your home.
Second-home owners (with restrictions): You can claim the Residential Clean Energy Credit for eligible upgrades made to a second home you use as a residence, but not the Energy Efficient Home Improvement Credit. Additionally, the second home must be located in the US and cannot be rented out during the year.
Renters (limited options): Renters have fewer options, but not zero. You might be able to claim the Residential Clean Energy Credit if you install certain renewable energy systems (like solar panels) but only if you own the system and lease it to the homeowner. For the Energy Efficient Home Improvement Credit, some specific improvements like furnaces and air conditioners can be claimed by renters if they pay for and own the equipment, with written consent from the landlord.
Non-homeowners and property owners not living in the home: Unfortunately, if you don’t own or occupy a home in the US, you wouldn’t be eligible for either of these credits. This includes people living in shared housing, hotels, or temporary accommodations.
Here are some additional factors to consider:
Tax liability: Both credits are non-refundable, meaning they can only reduce your tax liability to zero, not generate a refund.
Income limitations: There are no income limitations for claiming these credits.
Year of installation: The credits apply to improvements installed or equipment purchased after January 1, 2023.

For a more detailed and accurate assessment of your eligibility, it’s always best to consult a trusted tax professional or refer to the official IRS and Energy Star resources I shared previously. They can provide specific guidance based on your individual circumstances.

Okay, let’s break down what qualifies for both the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit in 2023:
Shared qualifications:
Location: The improvements must be made to your primary residence in the United States.
Installation date: Both credits apply to improvements installed or equipment purchased after January 1, 2023.
Energy Star certification: Many eligible products in both categories, like windows, doors, furnaces, and air conditioners, require Energy Star certification.

Unique qualifications for each credit:
Residential Clean Energy Credit:
Equipment types: Solar panels, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology.
Specific details: For solar panels, the credit applies to photovoltaic (PV) and solar thermal systems within certain size limitations. Wind turbines must be small and for residential use. Geothermal heat pumps and fuel cells have specific efficiency requirements. Battery storage must be integrated with a qualifying renewable energy system.

Energy Efficient Home Improvement Credit:
Improvement types: Windows, doors, skylights, insulation, roofs, heating and cooling systems, water heaters, and home energy audits.
Specific details: Each improvement category has specific qualifications and limitations. For example, windows and doors have size and U-factor (insulation) requirements. Certain roof types and specific efficiency levels for furnaces and air conditioners qualify. Home energy audits must be conducted by qualified professionals.

Note: These are just general summaries.
For detailed and accurate information on what qualifies for each credit, including specific product specifications, efficiency requirements, and limitations, refer to the official IRS resources:
Residential Clean Energy Credit: https://www.irs.gov/forms-pubs/about-form-5695
Energy Efficient Home Improvement Credit: https://www.irs.gov/forms-pubs/about-form-5695