Homeowners can cut their tax bill if they install new energy-efficient windows, doors, water heaters, furnaces, air conditioners, and the like. Legislation extends and enhances two tax credits that reward “green” updates to your home.

Energy Efficient Home Improvement Tax Credit (25C)

One of the most important aspects of the IRA for homeowners is the Energy Efficient Home Improvement Tax Credit. Previously known as the Non-business Energy Property Credit, this tax credit is new and improved through the IRA and provides opportunities to save on your energy-efficient upgrades.


Starting in 2023, the tax credit will be equal to 30 percent of the cost for all
eligible home improvements made from January 1, 2023 to December 31,
2032. The 25C credit has an annual cap of $1,200 (including up to $600 for a
qualified air conditioner or gas furnace), or up to $2,000 with a qualified heat
pump, heat pump water heater, or boiler.

Additionally, there are no income requirements for this tax credit and starting
in 2023, 25C is no longer a ‘one time’ credit, but an annual one.

What if homeowners had eligible equipment installed in 2022?

Homeowners who had eligible HVAC equipment installed on or after January 1, 2022, may be eligible for retroactive tax credits under this program. The 2022 tax credit is not as robust, but will credit 10 percent of the costs of installing qualified equipment and 100 percent of the costs associated with installing qualified water heaters, heat pumps, central air conditioning systems, furnaces, hot water boilers and air circulating fans.

With this tax credit, there is a lifetime limit of $500 or $300 for certain water heaters, heat pumps, and air conditioning systems for systems purchased in 2022.

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