How Does the Energy Efficient Home Improvement Tax Credit Work?

Modern house with solar panels on roof beneath a pale blue sky.

The energy efficient home improvement credit is a federal tax credit that can help homeowners recoup the cost of energy efficient home upgrades. Through 2032, homeowners may qualify for up to $3,200 annually in tax credits. For more information, visit the IRS’ energy home improvements page.*

Who qualifies for the energy efficient home improvement credit?

To qualify for the energy efficient home improvement credit, the home has to be your primary residence and located in the U.S. The home has to be an existing home, not a home that you plan to build.

electric heat pump outside home
Electric or natural gas heat pumps qualify for up to $2,000 in tax credits, and also happen to be the #1 home project in value recouped.

Which projects qualify for the energy efficient home improvement credit?

Qualifying home improvement projects for the energy efficient home improvement credit must meet energy efficiency standards and be new materials. These projects can be combined on tax returns to receive up to $3,200 annually in tax credits.

  • Electric or natural gas heat pumps (up to $2,000)
  • Electric or natural gas heat pump water heaters (up to $2,000)
  • Biomass stoves and boilers with a thermal efficiency rating of at least 75% (up to $2,000)
  • Insulation and air sealing materials or systems that meet International Energy Conservation Code (IECC) standards in effect at the start of the year 2 years before installation (up to $1,200)
  • Windows and skylights (up to $600)
  • Exterior doors that meet Energy Star requirements ($250 per door, up to $500 total)
  • Natural gas, propane, or oil water heaters (up to $600)
  • Natural gas, propane, or oil furnaces and hot water boilers (up to $600)
  • Central air conditioners (up to $600)
  • Electric panel upgrade (up to $600)
  • Home energy audit (up to $150)

For full details, visit the IRS’ energy home improvements page.*

How can I claim the tax credit?

File Form 5695, Residential Energy Credits Part II, with your tax return to claim the credit. You must claim the credit for the tax year when the property is installed, not merely purchased.

Are there any other clean energy federal tax credits?

Yes. If you invest in renewable energy for your home such as solar, wind, geothermal, fuel cells or battery storage technology, you may qualify for an annual residential clean energy tax credit up to 30% the cost of installation. Visit the IRS page to learn more.

What kind of home equity loan should I take out to pay for my energy efficient home improvement project?

DuPage Credit Union offers four home equity loan options to help you pay for your home improvement project, each offering their own advantages. Speak with a Residential Lending Specialist to help determine which loan makes the most sense for you.

  • Home Equity Line of Credit (HELOC): Our most popular home equity loan type. Similar to a credit card, with a HELOC, you have access to a variable rate line of credit that you can draw on for up to 10 years.
  • Conventional Equity: A fixed rate loan. Unlike a HELOC, with a Conventional Equity loan, you receive the funds in one lump sum.
  • Flex Equity: A fixed rate loan for the first 5 years. Thereafter, your rate is variable.
  • Future Value Home Equity Loan: Want to make updates to your home but have little equity? We use the appraised future value of your home to get you the loan you need. Similar to the Flex Equity loan, this loan is fixed for the first five years, and then variable.

*DuPage Credit Union cannot give tax advice and cannot guarantee the eligibility of any home improvement qualifying for the federal tax credit. It is recommended that you consult a tax advisor to determine any tax credit or deductibility of interest.

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