In recent times, we have witnessed a rise in the cost and growth of energy concerns about climate change, which has prompted many homeowners to find better ways to reduce their energy consumption.
The good news is that the government has offered incentives that are aimed at encouraging the use of efficient energy. One such incentive includes the use of Energy Tax Credits, which provide a significant tax break for homeowners or business owners using efficient energy.
This article is aimed at explaining the 2024 tax credit in detail. It will also answer: How much is the energy tax credit? Who qualifies for energy tax credits? What are the requirements for claiming the tax credit and how do you claim the tax credit?
How much is the Energy Tax Credit?
The amount of credit you will get depends on the type of energy-efficient upgrades.
However, if you make qualified energy-efficient improvements to your home on the first of January 2023, you may qualify for a tax credit of up to $3,200.
Requirements for Claiming the Credit
For you to qualify for the Energy Tax Credit, you must first of all be a homeowner, and it should be used as your primary residence. Specific requirements vary based on the type of energy-efficient improvement being done in the house.
It is important to keep detailed records of expenses, which include receipts and permits. However, some credits have deadlines for when the improvements should be completed.
Who Qualifies for the Energy Tax Credit?
To qualify for the energy-efficient home improvement credit, your home must be your primary residence situated within the United States. It cannot be a newly constructed property.
While your home cannot be exclusively used for business purposes, limited business use is permissible. If less than 20% of your home is dedicated to business activities, you can claim the full credit. However, if business use exceeds this threshold, the credit amount may be reduced.
How to Claim the Energy Tax Credit
To claim your energy tax credit, here are the steps to follow.
- Gather all the necessary documentation, which includes receipts, permits, and contractor information.
- Complete IRS Form 5695, which provides detailed information about your qualifying expenses.
- The next step is to attach this form to your federal tax return by the filing deadline.
Some Additional Information: For maximum credit, you can consider combining eligible improvements, consulting a tax professional, and exploring additional states or local incentives as well.
How to Calculate Your Tax Credit
Here is a bounce for you. Do you want to calculate your tax credit? Then you should consider any subsidies, rebates, or incentives you receive for an energy-saving home improvement when calculating your credit amount.
In your calculations, it is important to note that utility-based energy incentives and certain rebates are subtracted from your expenses before calculating your credit, and the state energy efficiency incentive typically is not.
