The Inflation Reduction Act made home-renovation history in 2022 by expanding tax credits for nearly two dozen projects that make homes more efficient, from installing energy-efficient windows to upgrading air-conditioners or heaters.
The tax breaks were designed to be available for a decade, but the tax and domestic policy bill that passed in July now terminates them at the end of 2025. To use them, said Noah Goldmann, a policy manager at the energy-efficiency nonprofit Rewiring America, you must buy any new products and have them installed by Dec. 31.
Get it while you can, because the Residential Clean Energy Tax Credit and Energy Efficient Home Improvement Tax Credit, as these programs are known, can save homeowners thousands of dollars.
As with any tax deductions, applying the credits can be confusing. For most of the efficiency upgrades, there is a price cap on a potential deduction for each product. You can deduct up to 30 percent of the cost of the product or the price cap, whichever is lower. There is also a maximum deduction of $3,200.
For example, you could deduct up to $2,000 for a heat pump, a heat pump water heater, or a biomass stove or boiler, and then take an additional $1,200 for insulated doors, windows, skylights or weather stripping. Or, you could use the deduction on electrical components required to update the breaker box in your kitchen to allow for replacing a gas range with an induction model.
The caps and maximums do not apply to fuel cells, solar energy systems, geothermal heat pumps, battery storage, or small wind turbines. For these products, you can deduct up to 30 percent of the total cost, with no price cap or maximum deduction.
Some credits apply only to existing homes or to primary residences; some are only available in certain locations; and some are not available to renters.
Review the program requirements and the tax form instructions from the Internal Revenue Service before you make a purchase. Better still, have an accountant or your tax preparer help you.
And of course, save your receipts.
Rachel Wharton writes about kitchens and related home topics for the Times Real Estate section.
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