4 Home Renovation Projects That May Help With Your Taxes

Were you aware that in the Inflation Reduction Act of 2022, homeowners can obtain additional federal income tax credits for energy-efficient improvements on home renovation/remodeling projects until 2032?  Yes, according to the National Association of the Remodeling Industry (NARI).    

They recommend upgrading these projects with ENERGY STAR certified products. ENERGY STAR is a government-backed certification on certain household items that are energy efficient, and help lowers energy bills, saving homeowners money.   ENERGY STAR is administered by the Environmental Protection Agency (EPA). 

Now, there is no guarantee with these improvement projects are tax credit eligible, but it is definitely worth checking out.  As always, please check with your tax professionals on eligibility.   Here is a list of projects that you can review with them. According to NARI, the following home improvement projects may be eligible for tax credits:

1.  Upgrading Your Heating, Ventilating, and Air Conditioning System (HVAC)
   
   Installing energy efficient heating and cooling systems, such as ENERGY STAR certified, may help you qualify for tax credits.  Some of these products include air source heat pumps, central air conditioners, boilers, and furnaces. Furnaces can be natural gas, oil or propane.  According to ENERGY STAR, up to $3,200 of tax credits each year may be eligible.    For more specific information on the various energy efficient products that may qualify for these tax credits go to the ENERGY STAR website (click here).
   
   
2. Replacing Your Water Heater
   
   You can replace your water heater with a natural gas or tankless gas energy-star certified models.  Your maximum tax credit would be $600, and you can also claim 30% of the product cost.  For more information on the ENERGY STAR certified water heaters go to the website (click here).
   
   
3. Install More Insulation   
   
   Improving energy efficiency by installing more insulation in critical areas.  There are a variety of insulation types such as batts, rolls, blow-in fibers, rigid boards, expanding spray and pour-in-place that may qualify for tax credits.   With insulation, you can get the maximum tax credit up to $1,200 and can claim up to 30% of the product cost.  Also, using products that reduce air leaks can qualify, if they come with a Manufacturers Certification Statement.  These products can include:  weather stripping, spray form, air sealing caulk and house wrap, according to ENERGY STAR.  Investing in good quality insulation can improve energy efficiency immensely and can also help you lower your utility bills, especially in those cold winters. I can personally verify that good insulation makes an immense difference.   For more info on insulation tax credit, go to the website (click here).
   
   
4.  Install New Energy Efficient Windows and Sliding Patio Doors
   
   Installing energy efficient windows and sliding patio doors, such as those that are ENERGY STAR certified, can make a dramatic difference in increasing your comfort of living and seeing lower utility bills in a big way!  You can earn up to $1,200 tax credit per year!    You can also claim 30% of product costs per year up to $600 for windows and up to $250 per door for a maximum of $500 per year.   For more information on the windows and sliding patio doors tax credit, go the website (click here).
   
   

Those are the little-known home improvement projects that can bring you some relief with tax credits.  Please keep in mind that these tax credits only apply where for the principal property where the homeowner lives.  This does not apply to rentals nor new construction homes.   Also, be aware that the Inflation Reduction Act of 2022 is a 10-year program.  These deductions are good until 2032.  After that, they are scaled down or may no longer be eligible.  Please double check with your tax professional for more updated information. 

NARI recommends that you do a complete home audit before doing any of these projects, to determine which ones need to be addressed and it can greatly help improve overall energy efficiency for your whole home.  It will also help you to determine which projects to do first and which you may not need to do at all, to save you money.   For more info on a home energy audit, check out my previous article “Why Every Homeowner Should Do an Energy Audit” (click here).

If you are seriously considering, or know someone that is,  tackling one or all of these projects and need recommendations for contractors or handymen, send me a quick email (click here).

(Note:  information for this article came from the National Association of the Remodeling Industry.  For more information, check out their website:  https://remodelingdoneright.nari.org/).