Updating Your Home? Check for These Energy-Savings Credits Before You Start

Looking to upgrade your home in 2025? You might be leaving money on the table if you haven't explored the energy-saving tax credits and rebates available to homeowners.

The Hidden Benefits of the Inflation Reduction Act

While most people associate the 2022 Inflation Reduction Act with job creation and infrastructure improvements, many homeowners are unaware of its significant benefits for energy-efficient home upgrades. This legislation provides federal tax credits covering a percentage of costs for improvements like:

• Heat pump installations
• Window and door upgrades
• Professional home energy audits
• And much more

"In my almost 20 years, I've never seen the opportunity [to make energy improvements] so lucrative. This is the best it's ever going to get," explains Melanie Paskevich of NeighborWorks of Western Vermont.

Available Credits Most Homeowners Don't Know About

According to White House data, 3.4 million homeowners claimed $8.4 billion in federal tax credits for energy improvements in 2023. However, this represents only a fraction of the available funding. A NeighborWorks survey revealed that half of the 2,500 respondents were completely unaware of these financial incentives.

Even more concerning, nearly the same number were unfamiliar with energy audits – professional assessments that identify energy waste in your home and recommend cost-effective improvements.

"Families could literally be letting money sweep out their windows and doors," notes NeighborWorks spokesman Douglas Robinson.

What Credits Can You Claim?

The good news: these tax credits have minimal restrictions. The main requirement is that the improvements must be made to your principal residence (with some exceptions for renewable energy upgrades to second homes).

Here's what you can claim:

• 30% of energy upgrade costs (up to $2,000) in the tax year you make the improvement
• Additional credits up to $1,200 for other qualified improvements in the same year
• 30% of costs (up to $1,200) for energy-efficient windows, doors, skylights, and weather stripping
• 30% of renewable energy investments (solar, wind, geothermal, fuel cell, or battery storage) through 2032 (decreasing to 26% in 2033 and 22% in 2034)

For renewable energy credits (except fuel cells), you can claim improvements on a second home if you live there part-time and don't rent it out. Any excess credit can be carried forward to reduce future tax bills.

Maximizing Your Benefits: A Strategic Approach

To get the most from these programs, consider spreading your upgrades across multiple years. Start with an energy audit to identify priorities – you can claim 30% of the audit cost (up to $150).

For example:

1. Year 1: Energy audit + attic insulation (30% of costs up to $1,200)
2. Year 2: Air-source heat pump installation (30% of costs up to $2,000)

Beyond Federal Credits: State and Local Incentives

Don't stop at federal tax credits! Most states, many utilities, and even some counties and manufacturers offer additional rebate programs that can be combined with federal incentives.

Some notable examples:

• Maryland's Clean Energy Advantage Loan Program: Provides 24-month interest-free loans for solar panel purchases
• Minnesota: Exempts solar energy equipment from sales tax
• Missouri: Offers sales tax exemptions for energy-efficient appliances (up to $1,500 per appliance during designated weeks)

Many electric companies provide free energy audits and rebates for common household appliances, smart thermostats, and HVAC equipment.

Act Now: Funding Is Limited

While tax credits should remain available through their expiration dates, Department of Energy funding distributed through state energy offices often runs out quickly.

"We have enough folks on our waiting list to spend down our allocation every year," says Joyce Parton of CHN Housing Partners in Cuyahoga County, Ohio.

Don't miss this opportunity to make your home more comfortable and energy-efficient while saving money. As Paskevich notes, "People should be banging on our doors" to take advantage of these programs.

Ready to start your energy-efficient home upgrade journey? Contact your state energy office or local utility company to learn about available programs in your area.