As we step into 2024, many consumers have their sights set on energy efficiency. It’s no surprise that the demand for energy-efficient home improvements has increased in recent years. The aim is to reduce their carbon footprint but also to take advantage of valuable incentives that can reduce their tax burdens.
But these programs are only helpful if you’re aware of them and the requirements. As always, we’re in your corner and happy to educate you on all matters related to your home. This blog post will help you make the most of the credits available to your household in 2024 so you can make more informed decisions regarding appliances and other high-ticket items.
Making Your Home More Energy Efficient
As it stands now, there’s a diverse range of home improvements qualifies for energy-efficient credits. A few ones to research include:
- Solar Power Solutions: Solar panel installations are on the rise, especially in warmer climates. Technological developments have made it an increasingly affordable and efficient option, allowing homeowners to harness renewable energy and potentially cut back or opt out of traditional power sources.
- Smart Home Technologies: The integration of smart home technologies can help homeowners monitor and reduce energy usage. Smart thermostats, lighting systems, and appliances can introduce increased visibility, leading to optimized consumption and potential credit eligibility.
- High-Performance Windows and Doors: Investing in energy-efficient windows and doors improves insulation, curbing heat transfer and enhancing overall comfort.
- Geothermal Heating and Cooling Systems: Geothermal systems, which harness the stable temperature of the Earth’s subsurface to heat and cool homes, are becoming more prominent in homes across the country. These systems are highly efficient and often qualify for substantial energy-efficient credits.
- Water Conservation Upgrades: Homeowners might be interested in upgrades that not only save energy but also conserve water. Making the switch to energy-efficient water heaters, installing low-flow faucets and toilets, and implementing rainwater harvesting systems may all be eligible for credits.
What is the Energy Efficient Home Improvement Credit?
Now that you know which items might qualify for a financial incentive come tax time, you’re likely wondering about the specifics. The Energy Efficient Home Improvement Credit is a government program that encourages homeowners to make energy-efficient upgrades to their properties.
The expenses below may qualify if they meet certain requirements:
- Exterior doors, windows, skylights and insulation materials
- Central air conditioners, water heaters, furnaces, boilers and heat pumps
- Biomass stoves and boilers
- Home energy audits
The credit is determined according to a percentage of the total improvement expenses in the year of installation. For instance,
- 2022: 30%, up to a lifetime maximum of $500
- 2023 through 2032: 30%, up to a maximum of $1,200 (heat pumps, biomass stoves and boilers have a separate annual credit limit of $2,000), no lifetime limit
These enhancements can help in the way of environmental conservation and also result in long-term cost savings for homeowners through reduced energy bills.
What is ENERGY STAR?
You might be familiar with the ENERGY STAR designation and you might even have appliances that meet the standards. ENERGY STAR is a joint program of the Environmental Protection Agency (EPA) and the Department of Energy (DOE) whose objective is to help consumers and businesses adopt energy-efficient products and practices.
To claim the Energy Efficient Home Improvement Credit for appliances that meet applicable ENERGY STAR requirements, you must file Form 5695, Residential Energy Credits Part II, with your tax return to claim the credit. The credit must be claimed for the tax year when the property is installed, not just purchased. Your tax professional can help guide you so that you get the most savings.
Planning for Tax Year 2024
To maximize the benefits of energy-efficient home improvement credits in 2024, homeowners should invest time and energy into the following:
- Research local incentives: In addition to national credits, many regions offer local incentives for energy-efficient upgrades. Homeowners should research and follow up on these opportunities to enhance their overall savings.
The Inflation Reduction Act (IRA) provides billions of dollars for clean energy investments. They’ve earmarked as much as $9 billion for residential energy efficiency and beneficial electrification rebates to be administered and implemented by State Energy Offices.
But don’t stop here. Electric companies across the country offer several types of rebates and incentive programs for energy efficiency goals. Incentives range from free energy audits to rebates for upgrading to more efficient common household appliances. It’s worth a phone call to learn more about the program requirements and how you might enroll.
- Consult with professionals: Consulting with energy auditors, contractors, and tax professionals can give you an edge when it comes to maximizing the impact. These professionals can help homeowners make more strategic decisions around improvements and navigate the documentation process.
- Plan comprehensive projects: Rather than tackling one-off upgrades, homeowners may consider comprehensive projects that address multiple facets of energy efficiency. This approach not only maximizes the benefits of credits but also creates a more sustainable and resilient home.
- Schedule a home energy audit: Home energy audits help you quantify how much energy your home uses and related improvements to reduce consumption. Per the IRA, the energy-efficient home improvement tax credit will help cover the cost of home energy audits. The credit covers 30% of the cost of a home energy audit and is capped at $150.
In 2024 and beyond, energy-efficient home improvement credits can help homeowners align their living spaces with eco-friendly principles. By staying informed, understanding eligibility criteria, and strategically planning improvements, homeowners can be in a better position to save energy, money and be part of the solution.
We’re here to help you achieve those goals. Whether it’s installing a more energy-efficient furnace or geothermal heat pump, we know how to help homeowners reduce costs and carbon footprint. You can call us any time at 800-288-2269 – We are available 24 hours a day, seven days a week. Your comfort is important to us, and that’s why J.O. Mory and our team of professionals are good for your home.