Tax credits for energy efficient home improvements
Tax credits for energy efficient home improvements
Energy efficient home improvement tax credits
The Energy Efficient Home Improvement Credit lets homeowners claim up to $3,200 per year for eligible upgrades, such as energy efficient windows, AC units, and water heaters. Other incentives include a 30% solar panel tax credit with no annual limit and instant appliance rebates up to $14,000 for qualifying households.
The table below breaks down the available tax credits for energy efficient home improvements on existing homes.
| Equipment type | Available tax credit |
|---|---|
| Electrical | |
| Solar electricity Battery storage Fuel cells Wind turbine |
30% of cost |
| Electric panel or circuit upgrades for new equipment* | 30% of cost, up to $600 each |
| Heating, cooling, & water heating | |
| Heat pumps** Heat pump water heaters** Biomass stoves** |
30% of cost, up to $2,000 total |
| Geothermal heat pumps Solar water heating |
30% of cost |
| Air conditioners* Heating equipment* Water heaters * |
30% of cost, up to $600 each |
| Other energy efficiency upgrade expenses | |
| Home energy audits* | 30% of cost, up to $150 each |
| Insulation materials* | 30% of cost |
| Windows & skylights* | 30% of cost, up to $600 total |
| Exterior doors* | 30% of cost, up to $500 total (up to $250 each) |
| Home electric vehicle charger | 30% of cost, up to $1,000 |
*Annual combined cap of $1,200 total. **Annual combined cap of $2,000 total. (Source: Energy.gov)
If you're not sure where to start, see our home energy efficiency guide detailing home improvements that have the biggest impact on your energy bills.
Starting January 1st, 2025, your tax return must include the qualified product identification number (PIN) of any items for which you're claiming a home energy tax credit.
Energy Efficient Home Improvement Credit
The Energy Efficient Home Improvement Credit allows you to claim up to 30% of the cost of eligible expenses, with a total annual cap of $3,200. The following home improvements qualify for this tax credit:
Biomass stoves and boilers
Efficient central air conditioners, water heaters, furnaces, boilers, and heat pumps
Windows, skylights, and exterior doors
Insulation materials
Home energy audits
While the tax credit is 30% for qualified upgrades, the total dollar amount you can claim on each upgrade varies. Refer to the table above for more details.
Residential Clean Energy Credit
The Residential Clean Energy Credit—formerly the Solar Investment Tax Credit or ITC—allows a 30% tax credit on most residential clean energy property and systems. This 30% credit reduces to 26% in 2033, and to 22% through 2034, with no annual maximum or lifetime limit. Eligible items include:
Solar, wind, and geothermal power generation
Solar water heaters
Fuel cells
Battery storage
Homeowners in some states can reduce electricity costs further by selling Solar Renewable Energy Credits (SRECs) based on the electricity their solar systems generate for use by public utilities. Check the Database of State Incentives for Renewables & Efficiency (DSIRE) website for current state programs.
High-Efficiency Electric Home Rebate Act (HEEHRA)
The High-Efficiency Electric Home Rebate Act (HEEHRA) provides rebates of up to $14,000 for low- and moderate-income homeowners to replace old, inefficient electric resistance and gas appliances with new, energy-efficient electric models. This lowers energy bills an eliminates hefty repair costs on older appliances and systems.
| Upgrade | Maximum rebate* |
|---|---|
| Heat pump water heater | $1,750 |
| Heat pump for space heating or cooling | $8,000 |
| Electric stove/cooktop Range/oven Heat pump clothes dryer |
$840 |
| Breaker box | $4,000 |
| Electric wiring | $2,500 |
| Weatherization (insulation, air sealing, ventilation) | $1,600 |
*Maximum total combined rebate of $14,000 per year.
The HEEHRA rebates—upfront discounts instead of tax credits—are scheduled to roll out in limited areas starting in late 2024, with most areas getting access in early 2025. Once available, low-income households can get 100% rebates and moderate-income households can get 50% rebates on qualifying electrification projects.
Alternative Fuel Vehicle Refueling Property Tax Credit
If you install an electrical vehicle (EV) charging station in your home, the Alternative Fuel Vehicle Refueling Property Tax Credit provides a tax credit of 30% of the total cost, up to $1,000. Electric car charging stations cost $750 to $2,600 on average for the hardware and installation.
Check with your utility company for additional incentives. Many companies offer rebates of up to 50% on home EV charging stations.
Energy efficient home improvement FAQs
What is ENERGY STAR?
ENERGY STAR is a government-backed program that works with the Environmental Protection Agency to encourage the manufacture and use of energy-efficient solutions to save you money and protect the climate. ENERGY STAR-rated appliances meet specific energy efficiency requirements set forth by the EPA.
What is a home energy audit?
A home energy audit—also called a home energy assessment—identifies your home's energy consumption, areas of energy waste, and potential safety concerns like air quality issues. The audit typically involves:
A review of current utility bills
A walk-through and inspection
Energy efficiency tests
A report of the findings with recommendations for improvements
A home energy audit costs $200 to $600 on average. The audit is eligible for a federal tax credit of 30% of the cost, up to $150.
Which appliances or systems waste the most electricity?
An HVAC system is typically the biggest electricity user, accounting for about 50% of a home's energy use. Other items that consume the most electricity include water heaters, washers and dryers, and lighting. Focusing on improving efficiency in these areas provides the best opportunities to save electricity and money.
Does unplugging appliances and devices save money?
Unplugging appliances and electronic devices when not in use eliminates phantom load, the electricity consumed when these items are powered on but not actively operating. The simple action of unplugging them when not in use can save you 5% to 10% on electricity bills.
Getting quotes for energy-saving home improvements
Follow these tips when hiring a home energy auditor or home improvement contractor near you:
Use an online energy assessment tool to give you an idea of areas that may need improvement.
Search for an energy auditor certified by one of these organizations:
For renewable energy systems, look for contractors accredited by the North American Board of Certified Energy Practitioners (NABCEP) and members of these organizations:
Ask contractors for references and confirm their licensing and credentials.
Compare estimates from at least 3 contractors before making any home energy efficiency improvements.
Check out reviews on HomeGuide and Google.
Always get a written contract and warranty in hand before the work begins.
Questions to ask an energy-efficient home improvement contractor
Ask the following questions to ensure you choose a qualified energy auditor or contractor to make your home more efficient:
What licenses and certifications do you have?
What professional organizations do you belong to?
Which tests does the energy audit include?
What other tests can you do, and how much extra do they cost?
Does the audit include a follow-up visit to confirm the improvements are successful?
How long will the energy audit or project take?
Does this audit qualify for the federal tax credit?
How do you determine which improvements I should make first?
Does this home improvement project qualify for a federal tax credit?
Are there any other incentives or rebates available for making these upgrades? Can you help me obtain them?
Using our proprietary cost database, in-depth research, and collaboration with industry experts, we deliver accurate, up-to-date pricing and insights you can trust, every time.