The residential energy credit has been renamed under the Inflation Reduction Act of 2022. The residential energy efficient property credit has changed to the residential clean energy credit. The nonbusiness energy property credit has changed to the energy efficient home improvement credit.
Residential clean energy credit (Part I).
The residential clean energy property credit is a 30-percent credit for certain qualified expenditures made by a taxpayer for residential energy efficient property. The Inflation Reduction Act (IRA) extended the residential clean energy property credit through 2034, modified the applicable credit percentage rates, and added battery storage technology as an eligible expenditure. The credit applies for property placed in service after December 31, 2021, and before January 1, 2033.
- Available for both existing homes and homes being built.
- You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, biomass fuel property, and fuel cell property placed in service in 2022 through 2033
- The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property
Energy efficient home improvement credit (Part II).
Through December 31, 2022, the energy efficient home improvement credit is a $500 lifetime credit.
- Extended to property placed in service through December 31, 2022
- Only available for existing homes (not available for new construction).
- Qualified energy efficiency improvements must meet certain energy efficiency requirements
- You may be able to take a credit equal to the sum of:
- 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2022, and
- Any residential energy property costs paid or incurred in 2022.
This energy efficient home improvement credit is limited as follows.
- A total combined credit limit of $500 for all tax years after 2005.
- A combined credit limit of $200 for windows for all tax years after 2005.
- A credit limit for residential energy property costs for 2022 of $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler;
and $300 for any item of energy efficient building property.
Beginning January 1, 2023, the amount of the credit is equal to 30% of the sum of amounts paid
by the taxpayer for certain qualified expenditures, including (1) qualified energy efficiency improvements installed during the year, (2) residential energy property expenditures during the year, and (3) home energy audits during the year.
If the total of any nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you can't take the energy efficient home improvement credit in 2022.
What is considered a Home?
A 'home' is where you lived during 2022. This can include a house, houseboat, mobile home, cooperative apartment, condo, or a manufactured home (meets Federal Manufactured Home Construction and Safety
If you claim this credit on your home, you must reduce the basis of the home by the amount of credit claimed.