Tax credits available for making efficiency improvements

January 5, 2023

A variety of federal income tax credits are now available to homeowners for making efficiency improvements.

The majority of these credits have been made available through the Inflation Reduction Act, in an effort to assist with cost-saving energy efficiency improvements.

A list of available credits can be found online at the Department of Energy’s website.

Some of the credits will complement the rebates offered through Heartland Energy’s Power Forward program.


heat pump icon

Heat pumps

Heat pumps were previously eligible for a $300 tax credit. Beginning January 1, 2023 though 2032, they are now eligible for a credit of up to 30% of their cost, with a maximum credit of $2,000 per year.

In general, all ducted heat pumps that have earned the ENERGY STAR label are eligible for the credit, as well as certified mini-split systems (non-ducted) with a SEER rating of 16 or greater.  Among the models that earn the ENERGY STAR Cold Climate designation, ducted systems with and EER of 10 or greater are eligible, and mini-splits with a SEER of 16 or greater are eligible. You can find eligible products here.

Geothermal heat pumps are also eligible for a 30% tax credit. You can find a list of qualifying equipment here.


Electric vehicles

If you purchase a new electric vehicle in 2023, you may qualify for a clean vehicle tax credit.

The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032. The credit is available to individuals and their businesses.

To qualify, you must buy it for your own use and use it primarily in the U.S. Limits also exist on the taxpayer’s gross income.

In addition, the vehicle’s manufacturer suggested retail price (MSRP) can’t exceed $80,000 for vans, sport utility vehicles and pickup trucks and $55,000 for other vehicles.

Visit the IRS website to learn more about EV tax credits, qualifications and how to claim the credit.


community improvement iconHome efficiency improvements

A variety of tax credits are now available for making efficiency improvements to your home.

You can claim a $150 tax credit for a home energy audit performed by a certified home energy auditor.

If you upgrade your home’s electrical panel, you could be eligible for a tax credit of 30% of the project cost, with a maximum credit of $600.

Exterior doors that are ENERGY STAR qualified also are eligible for a 30% tax credit, up to a maximum of $500.

Insulating your home can qualify for a credit of up to 30% of the project cost with a maximum credit of $1,200. 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 weather stripping, Spray foam in a can designed to air seal, caulk designed to air seal or house wrap.

Exterior windows or skylights that meet the ENERGY STAR Most Efficient criteria are also eligible for credits.

In addition to limits on the amount of credit you can claim for any particular equipment installation or home improvement, there are annual aggregate limits. The overall total limit for an efficiency tax credit in one year is $3,200. Given the way the annual aggregate limits are structured, it may be prudent to spread your improvements over a few years. 

If you’re considering making improvements that would be eligible for these credits, speak with your tax professional to ensure eligibility and maximum benefit.