From solar panels to insulation to heat pumps, homeowners have a wealth of opportunities to cut costs and carbon emissions through energy-efficient upgrades. Thanks to a set of federal tax credits extended through 2032, thousands of dollars in savings are on the table. The key is understanding how to qualify and when to act.
The Basics of Home Energy Tax Credits
Two key federal tax credits apply to home energy projects: the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit. Both can significantly reduce your federal tax liability—if you follow the rules. The Clean Energy Credit covers 30% of the cost of systems like solar panels, geothermal heat pumps, and battery storage. The Home Improvement Credit offers up to $3,200 annually for certain energy-efficient equipment and weatherization projects.
Beware of Limitations
These credits are nonrefundable—meaning they lower what you owe, but won’t result in a refund beyond that. However, unused portions of the Clean Energy Credit can be rolled into future tax years. Not so with the Home Improvement Credit, which is strictly limited to the year of installation.
Clean Energy Systems
- Solar Panels: Claim 30% of the full system cost (no limit) for panels installed between 2022–2032. Must be used on your primary or secondary U.S. residence.
- Solar Water Heaters: 30% credit for models using the sun for at least half their energy. Pool heaters don’t qualify.
- Geothermal Heat Pumps: 30% credit with no annual cap. Must use the ground or groundwater and be Energy Star certified.
- Battery Storage: Systems storing at least 3 kWh of electricity are eligible for the full 30% credit.
Energy Efficiency Upgrades
Heating and Cooling Equipment
- Heat Pumps: 30% of total cost up to $2,000. Must meet Energy Star Most Efficient criteria. Electric and gas heat pumps are both eligible.
- Biomass Stoves: Wood or pellet stoves with 75% efficiency qualify for a 30% credit up to $2,000.
- Traditional Boilers and Water Heaters: Natural gas, propane, and oil models meeting the Consortium for Energy Efficiency’s highest tier can earn up to $600 back.
Cooling Systems and Audits
- Central AC Units: Up to $600 credit. Must meet SEER2 and EER2 minimums (17 SEER2/12 EER2 for split systems).
- Home Energy Audits: Get 30% back (up to $150) for a certified audit that provides a report of actionable upgrades.
Weatherization and Windows
- Insulation: 30% credit up to $1,200. Includes batts, rolls, blow-in products, and air sealing materials (must have a Manufacturer’s Certification Statement).
- Exterior Doors: Up to $250 per door ($500 total), based on region-specific eligibility.
- Windows and Skylights: 30% back up to $600 per year. Verify through Energy Star labels and NFRC Certified Product Directory by climate zone.
Electric Vehicle Charging Equipment
Installing an EV charger at home? You may qualify for a 30% credit (up to $1,000), but your home must be located in a low-income or rural area. This is under a separate Alternative Fuel Vehicle credit and doesn’t impact other energy credits.
Extra Resources and State Incentives
Don’t stop at federal credits. Many state and local governments offer rebates and additional incentives. Use tools like the Database of State Incentives for Renewables & Efficiency (DSIRE) and Rewiring America’s calculator to stack savings.
Final Tips
- Make sure products are installed—not just purchased—within the tax year to qualify.
- Keep receipts and Manufacturer’s Certification Statements for your records.
- Always consult a tax professional when applying credits to ensure compliance with IRS rules.
Home energy upgrades can make your home more efficient, more valuable, and—thanks to federal support—more affordable than ever. Act now while these incentives are still in effect.
