global Tax Unlock Tax Savings with the Residential Energy Credit November 04, 2024 Attention homeowners and renters…planning to install clean energy systems in your home? You may qualify for the residential energy tax credit. We explore the details here. Homeowners and renters…you could qualify for a valuable tax credit if you use renewable energy! Learn more about the benefits of residential clean energy tax credits, which the Inflation Reduction Act has modified and extended. Green energy tax credits: important background The Inflation Reduction Act includes many green tax credits and incentives including several options for residential and commercial real estate. Check out our blog, Inflation Reduction Act Modifies Green Energy Tax Credits for a look at what is available for real estate-related green energy tax credits. One valuable credit is the residential clean energy credit. What does the residential clean energy credit apply to? Solar, wind, geothermal and fuel cell technology equipment qualify for the residential clean energy credit. This includes: Wind turbines Solar panels/photovoltaics for generating electricitySolar-powered water heaters Battery storage technologiesGeothermal heat pumps Fuel cells Certain types of solar roofing equipment How much is the credit? The residential clean energy credit percentage is 30% for systems placed in service between 2022 and 2032. The credit is limited to $500 for each 0.5 kilowatt of capacity of qualified fuel cell property expenditures for each tax year. This limit does not apply to expenditures for other types of qualified residential energy property. How did the Inflation Reduction Act change residential clean energy credits? The Inflation Reduction Act extends the residential clean energy credit through at least 2034. The credit percentage will drop to 26% for systems placed in service in 2033 and down to 22% for systems placed in service in 2034. Additionally, the Act extends eligibility for the credit to qualified battery storage technology expenditures and removes qualified biomass fuel property from credit eligibility. How do you claim the credit? To claim the credit, you must file Form 5695, Residential Energy Credits with your tax return. You are required to claim the credit for the tax year when the property is installed, not just purchased. What about the energy efficient home improvement credit? The energy efficient home improvement credit is often confused with the residential clean energy credit. Effective on January 1, 2023, the energy efficient home improvement credit is increasing with an annual credit up to $1,200. The amount of the credit is equal to 30% of the sum of amounts paid by the taxpayer for certain qualified expenditures, including qualified energy efficiency improvements installed during the year, residential energy property expenditures during the year, and home energy audits during the year.
