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Energy-Efficient Home Improvements Could Help People Reduce Energy Bills and Taxes

Energy-Efficient Home Improvements Could Help People Reduce Energy Bills and Taxes

by Internal Revenue Service

Photo courtesy of Raze Solar on Unsplash

Homeowners who make improvements like replacing old doors and windows, installing solar panels, or upgrading a hot water heater may qualify for home energy tax credits.

Who can claim the credits

Taxpayers making improvements to their principal, or in some cases, secondary residence, may be eligible for these credits. In some cases, renters may also be able to claim specific costs. Landlords can’t use these credits for improvements made to any homes they rent out. See Form 5695 instructions for more information.

There are two tax credits to help offset the costs of making energy-efficient improvements.

Energy Efficient Home Improvement Credit

Taxpayers can claim the Energy Efficient Home Improvement Credit only for improvements, renovations, or additions to an existing home. It doesn’t apply to newly constructed homes. Qualifying costs may include:

The amount of credit taxpayers can take is a percentage of the total improvement expenses in the year of installation:

Residential Clean Energy Credit

Taxpayers can also claim the Residential Clean Energy Credit for qualifying costs for either an existing home or a newly constructed home. Qualifying costs may include:

The amount of credit taxpayers can take is a percentage of the total improvement expenses in the year of installation:

To claim these credits, taxpayers should file Form 5695, Residential Energy Credits, with their tax return.

Beware of scams

Taxpayers should know what these credits can do for them and be careful of exaggerated claims from companies trying to get their business.