Tax Credits For Residential Energy Efficiency Extended
Written By: Warm Thoughts Communications on February 16, 2021
How about we share some good news?
Tax credits for residential energy efficiency have been extended retroactively, going back to December 31, 2019!
The tax credits for residential renewable energy products continue to be available through December 31, 2024, and beyond. Renewable energy tax credits for fuel cells, small wind turbines, and geothermal heat pumps now feature a gradual step down in the credit value, similarly to solar energy systems.
To learn more about current residential energy efficiency incentives, visit EnergyStar.gov.
Current Renewable Energy Tax Credits
Renewable energy tax credits for fuel cells, small wind turbines, and geothermal heat pumps are now available, courtesy of the Consolidated Appropriations Act of 2021. These tax credit allowances* include:
- 30% for systems placed in service by 12/31/2019
- 26% for systems placed in service after 12/31/2019 and before 01/01/2023
- 22% for systems placed in service after 12/31/2022 and before 01/01/2024
The tax credits apply to existing homes and new construction. Both principal residences and second homes qualify; rentals do not. Tax credits include installation costs.
- For geothermal heat pumps: All equipment must meet the requirements of the ENERGY STAR® program that are in effect at the time of the expenditure.
- For wind turbines: The turbine must generate no more than 100 kilowatts of electricity for residential use.
- For solar water heaters: At least half of the energy generated by the “qualifying property” must come from the sun. The system must be certified by the Solar Rating and Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed. Note: The credit is not available for expenses for swimming pools or hot tubs. The water must be used inside the dwelling. Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements.
- For solar panels: Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements.
- For fuel cells (residential fuel cell and microturbine system): The maximum credit is $500 per half kilowatt (kW) of power capacity. The fuel cell must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%. The home served by the system MUST be the taxpayer’s principal residence. In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per 0.5 kW. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the amount they paid.
How To Apply For Tax Credits
Tax credits are administered by the IRS. You can claim the credit using the form below and submitting it with your tax return:
If you have other questions, please contact the IRS at irs.gov/contact or 1-800-829-1040.
In addition to federal tax credits, local rebates and offers may be available in your area. Check the ENERGY STAR Rebate Finder for more information in your area.
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*Disclaimer: The tax credit information contained within this website is provided for informational purposes only and is not intended to substitute for expert advice from a professional tax/financial planner or the Internal Revenue Service (IRS).