Federal Income Tax Credits for Efficiency Upgrades
The Inflation Reduction Act has introduced an unprecedented suite of direct rebates and tax credits for residential electrification and efficiency (up to $14,000 per home). Tax credits covering 30% of the project costs will be available for qualifying improvements to your primary residence through 2032.
| Equipment | You can claim (%) | Max. Amount Credited | More Info | Note |
|---|---|---|---|---|
| Air Source Heat Pump | 30% | $2,000 | Tax Credit Information | Ducted: EER2 > 10 Ductless (mini-splits): SEER2 > 16, EER2 > 9, HSPF2 > 9.5 |
| Heat Pump Water Heaters | 30% | $2,000 | Tax Credit Information | Must be ENERGY STAR certified |
| Biomass Stoves/Boilers | 30% | $2,000 | Tax Credit Information |
Must have a thermal efficiency rating of at least 75%. |
| Windows & Skylights | 30% | $600 | Tax Credit Information | Must meet the Energy Star Most Efficient criteria to be eligible. |
| Exterior Doors | 30% | $500 ($250/door) | Tax Credit Information | Must meet the Energy Star Most Efficient criteria to be eligible. |
| Insulation | 30% | $1,200 | Tax Credit Information |
Typical bulk insulation products can qualify, such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place. Products that air seal (reduce air leaks) can also qualify, as long as they come with a Manufacturers Certification Statement, including:
|
| Water Heaters (Natural Gas, Oil, Propane) | 30% | $600 | Tax Credit Information | Gas > 0.81 UEF for tanks less than 55 gallons and >0.86 for tanks greater than or equal to 55 gallons. Tankless Gas >0.95 UEF |
| Furnaces | 30% | $600 | Tax Credit Information |
Gas furnace with AFUE >97%, Oil Furnace, fuel blends at least 20% of the volume of which consists of biodiesel, renewable diesel, or second generation biofuel. Must be an existing home & your principal residence. New construction and rentals do not apply. |
| Boilers | 30% | $600 | Tax Credit Information | ENERGY STAR certified gas boilers with AFUE > 95% are eligible. |
| Central Air Conditioners | 30% | $600 | Tax Credit Information | SEER2 > 16 is eligible |
| Electric Panel Upgrade | 30% | $600 | Tax Credit Information | Any improvement to, or replacement of, a panelboard, sub-panelboard, branch circuits, or feeders. Load capacity =>200 amps and in conjunction with additional energy efficiency improvements . |
| Home Energy Audit | 30% | $150 | Tax Credit Information | Must be conducted and prepared by a certified home energy auditor. TCEC home energy evaluations are not eligible for this tax credit. |
| Geothermal Heat Pumps | 30% | ------------ | Tax Credit Information | Must be Energy Star certified |
| Small Wind Turbines | 30% | ------------ | Tax Credit Information | Residential |
| Solar Energy Systems | 30% | ------------- | Tax Credit Information | Includes solar water heaters and solar panels. Must provide electricity to residence. |
| Fuel Cells | 30% | $500/ half (kW) of power capacity | Tax Credit Information | Nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%. |
| Battery Storage Technology | 30% | Tax Credit Information |
Must have a capacity of not less than 3 kilowatt hours. |
How can I maximize my tax credits?
Given the way the annual aggregate limits are structured, it may be prudent to spread your improvements over a few years. If your heating or cooling system is old, and you are considering a new air source heat pump, it is always wise to optimize your attic insulation first, so you don’t pay for more heating and cooling than you actually need. Making these upgrades together in one year would allow you a tax credit of up to $1,200 for the insulation and up to $2,000 for the heat pump. Similarly, you could combine a heat pump installation with window/door replacements. In that scenario, the $2,000 credit for the heat pump could be combined with tax credits up to $600 total for the windows/skylights plus $500 for two or more doors. If you replace your water heater the following year, you would be eligible for another 30% tax credit, up to $2,000 plus up to $600 if you need an electric panel upgrade to accommodate the new water heater.
For more information about these incentives, visit: https://www.energystar.gov/about/federal-tax-credits
