Taking Advantage of the Home Energy Audit Tax Deduction

Taking Advantage of the Home Energy Audit Tax Deduction

If you’re planning to make home improvements that will save energy, it may be beneficial to conduct a home energy audit. Thankfully, a federal income tax credit is available that covers 30% of the cost of the home energy audit, up to an annual limit of $150. In addition, there are tax credits for various other expenditures related to energy conservation. Recently, the IRS released guidelines on how to claim the tax credit for a home energy audit.

Overview – Home Energy Audit Tax Credit 2023

The home energy audit tax credit falls under the energy-efficient home improvement credit. This credit covers up to 30% of the total amount spent on certain eligible expenses. There are specific and overall spending limits for various categories of expenses. For instance, there’s a yearly limit of $1,200 for all building envelope components, energy property, and home energy audits. Building envelope components consist of exterior doors, windows, and skylights, in addition to insulation or air sealing materials or systems. Energy property encompasses items like specific central air conditioners, water heaters, furnaces, and hot water boilers. Another yearly limit of $2,000 applies to items such as electric or gas heat pump water heaters, electric or gas heat pumps, and biomass stoves and boilers.

There’s also a residential clean energy property credit available, which covers 30% of expenditure on items like solar panels, solar water heaters, fuel cell property, wind turbines, geothermal heat pump property and battery storage technology, without an overall spending limit.

Details on the Home Energy Audit Tax Credit

As mentioned earlier, the tax credit for home energy audits is limited to 30% of the audit cost, up to an annual limit of $150 (30% of $500 equals $150). This credit, along with credits for building envelope components and energy property, is subject to the yearly $1,200 limit on certain items. It’s important to keep the home energy audit as part of your tax records if you claim this credit.

A home energy audit is a written report and inspection of a home located in the United States. The home must be the taxpayer’s primary residence. The audit must meet certain criteria.

The audit needs to identify the most efficient and cost-effective energy improvements, including an estimate of the energy and cost savings for each improvement.

The inspection must be conducted or supervised by a certified home energy auditor.*
The written report must be prepared and signed by a certified home energy auditor.
The audit must adhere to certain industry and Department of Energy guidelines.
The Department of Energy maintains a list of certified home energy auditor programs at energy.gov.

*Until December 31, 2023, a home energy auditor does not need to be certified for the audit to qualify for the tax credit. Thus, the credit can be claimed even if the audit was not conducted by a certified auditor, provided the other criteria are met. However, after December 31, 2023, the home energy audit tax credit cannot be claimed unless the audit is conducted by a certified home energy auditor.

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