Energy Efficient Home Improvement Credit
Effective for 2023 & 2024, the nonbusiness energy property credit is renamed the energy efficient home improvement credit. The credit is increased to 30% of the cost of improvements made, and replaces the lifetime limitations to the following annual limitations.
1) In general, the combined credit for all energy efficient home improvements is limited to $1,200 per year, except for (5) below.
2) The credit for residential energy property expenditures is limited to $600 per year.
3) The credit for windows is limited to $600 in the aggregate for all exterior windows and skylights
4) The credit for doors is limited to $250 per year for any exterior door, and $500 in the aggregate for all exterior doors.
5) Notwithstanding paragraphs1 and 2 above, the credit allowed for heat pumps and heat pump water heaters, biomass stoves and boilers is limited to $2,000 per year.
6) The credit for energy audits is limited to $150 per year.
Qualified energy efficiency improvements include energy efficient insulation, exterior windows, skylights, and exterior doors that meet various energy standard requirements. The new law removes roofs from the definition of building envelope components, but adds air sealing insulation to the definition of insulation material or system which reduces the heat loss or heat gain of a dwelling unit.
Residential energy property expenditures include any of the following that meet or exceed certain high efficiency standards (various standards per item apply).
- An electric or natural gas heat pump water heater
- An electric or natural gas heat pump
- A central air conditioner
- A natural gas, propane or oil water heater
- A natural gas, propane or oil furnace or hot water boiler
- A biomass stove or boiler which used the burning of biomass fuel to heat a dwelling unit or to heat water for a dwelling unit
- An oil furnace or hot water boiler
- Improvements to, or replacement of a panel-board, sub-panelboard, branch circuits, or feeders with a load capacity of not less than 200 amps which is installed in conjunction with an energy efficiency improvement or qualified energy property.
Beginning with credits claimed in 2024, the taxpayer must include on his or her tax return the qualified product identification number of the energy efficient property. A qualified product identification number is a number assigned by a qualified manufacturer to the energy efficient property in which the credit is claimed.