Note: this page is for informational purpose only. Please seek tax advice from your tax professional.
We understand that energy-efficient improvements not only benefit the environment but may also help you save money on your energy bills. The government recognizes this too and offers tax credits for certain energy-efficient home improvements. Below, we'll be discussing the Energy Efficient Home Improvement Credit available for existing homes only.
The Energy Efficient Home Improvement Credit is an annual tax credit equal to the sum of 30% of the cost of energy improvements made in the tax year across three categories identified as: qualified energy efficiency improvements, residential energy property expenditures, and home energy audits.
Let's break down these three categories further to understand the home improvements that qualify for the tax credit and how much tax credit you can receive.
Who qualifies?
Individuals that pay income taxes. The tax credit will reduce your tax requirements, but not below zero.
Qualified Energy Efficiency Improvements
The first category available for credit is the amount paid for qualified energy efficiency improvements installed during the tax year. These improvements include energy-efficient building envelope components of insulation, air sealing, exterior windows, skylights, and doors. The tax credit amount for these improvements is 30% of the cost with caps and energy efficiency requirements as shown in the table below.
| Improvement Type | Energy Efficiency Requirements | IRA Incentives | Energize CT Incentive |
Insulation and Air Sealing
| Must meet International Energy Conservation Code (IECC) of two years prior to the year when the component is placed in service. Weather stripping, spray foam in a can, caulk designed to air seal, house wrap, as long it comes with a Manufacturers Certification Statement. | Up to 30% of costs (not including labor), up to $1,200 credited annually
| For a $75 fee through Home Energy SolutionsSM, Eversource and Avangrid customers are eligible for $1.70/sq. ft. for walls, attic floors and floored over attics, garage ceilings and rim joist; and $0.80/sq. ft. for basement ceilings. The rebate is paid per sq. ft. or 75% of the total cost, whichever is less, up to $10,000 on approved insulation project recommended during the visit. If your family’s combined gross annual income is below the state’s 60% income median, you may be eligible to receive the assessment and service at no-cost. |
Exterior Windows and Skylights
| Must meet ENERGY STAR(R) most efficient certification requirements
| 30% of costs (not including labor), up to $600 credited annually | Eversource and Avangrid customers are eligible to for a $100 rebate per window, if replacing single pane, single pane with storms or double pane windows with ENERGY STAR certified triple pane windows with a U-Value of less than or equal to 0.20. |
Exterior doors
| Must meet applicable ENERGY STAR requirements
| 30% of costs (not including labor), up to $500 total credited annually ($250 per door)
| The Sponsors of Energize CT do not offer incentives on energy-efficient doors at this time
|
Residential Energy Property Expenditures
The second category is the amount of residential energy property expenditures incurred during the tax year. These expenditures include heat pump water heaters, central air conditioners, natural gas, propane, or oil water heaters, natural gas, propane, or oil furnaces or hot water boilers, biomass stoves or boilers, and oil furnaces or hot water boilers that meet the ENERGY STAR efficiency standards. The tax credit is 30% of the installed cost with $2,000 total annual cap and energy efficiency requirements as follows:
| Improvement Type | Energy Efficiency Requirements | IRA Incentives | Energize CT Incentive |
Heat Pumps
| Air Source Heat Pumps Tax Credit | ENERGY STAR
| 30% of the costs (including labor), up to $2,000 credits annually on a primary or secondary residence for the installation of a ducted or mini-split heat pump. | Customers of Eversource and Avangrid can receive a rebate up to $15,000 for the purchase and installation of an air or ground source heat pump. |
Central air conditioners
| Central Air Conditioners Tax Credit | ENERGY STAR Current Efficiency Requirements >=SEER 16 | 30% of the costs (including labor), up to $600 credited annually on a primary or secondary residence for the purchase of an energy-efficient central air conditioner. | The Sponsors of Energize CT do not offer rebates on central air conditioners at this time
|
Hot water boilers (natural gas, propane, or oil fueled)
| Hot Water Boilers (Natural Gas, Propane, Oil) Tax Credit | ENERGY STAR Current Efficiency Requirements >=AFUE 95% | 30% of costs (including labor), up to $600 credited annually on a primary or secondary residence for the purchase of an energy-efficient hot water boiler. | Eversource and Avangrid customers are eligible for $750 off the cost of qualifying natural gas boilers. |
Biomass fuel stoves
| Biomass Stoves/Boilers Tax Credit | ENERGY STAR Efficiency >=75% | 30% off the costs (including labor), up to $2,000 credited annually on a primary or secondary residence for the purchase of an energy-efficient biomass fuel stove. | The Sponsors of Energize CT do not offer rebates on biomass fuel stoves at this time
|
Furnaces (natural gas or oil)
| Furnaces (Natural Gas, Oil) Tax Credits | ENERGY STAR Efficiency >=97% | 30% off the costs (including labor), up to $600 credited annually on a primary or secondary residence for the purchase of an energy-efficient furnace. | Eversource and Avangrid customers are eligible for $650 off the cost of qualifying natural gas furnaces. |
Heat pump water heaters
| Heat Pump Water Heaters Tax Credit | ENERGY STAR Must be ENERGY STAR rated | 30% off the costs (including labor), up to $2,000 credited annually on a primary or secondary residence for the installation of a heat pump water heater. | Eversource and Avangrid customers are eligible for $750 off the cost of qualifying heat pump water heaters. |
Natural gas storage water heaters
| Water Heaters (Natural Gas) Tax Credit | ENERGY STAR Efficiency must be >= 0.81 for less than 55 gallons and >=0.86 for greater than or equal to 55 gallons | 30% off the costs (including labor), up to $600 credited annually on a primary or secondary residence for the purchase of an energy-efficient natural gas storage water heater. | Eversource and Avangrid customers are eligible for a $300 instant discount on eligible natural gas storage water heaters. |
| Electrical Panel | |||
Panel or subpanel
| Must be according to the National Electric Code and have a load capacity of 200 amps or greater. Must be installed to enable the installation of an energy efficiency property or improvement
| 30% off the costs (including labor), up to $600 credited annually on a primary or secondary residence for the installation of an energy-efficient panel or subpanel. | The Sponsors of Energize CT do not offer incentives on electrical panels at this time
|
Home Energy Audits
The third category is for home energy audits. The tax credit amount for home energy audits is 30% off the costs (including labor), up to $150 annually.
It's important to note that the Energy Efficient Home Improvement Credit is only available for existing homes, not new construction. Labor costs for installation can be included in the costs and the IRS has allowances to capture labor if you install the improvement or equipment yourself.
How to Claim Energy Efficient Home Improvement Credits
To claim the tax credit, you must file IRS Form 5695 with your tax return. The tax credit is only for your primary residence and there are certain limitations. For example, if you receive utility rebates for any of the qualified improvements, you must subtract the amount of the rebate from the total cost of the improvement when calculating the tax credit. The total annual tax credit limit is $3,200. If you do not owe any taxes, then you cannot claim a tax credit.
In conclusion, the Energy Efficient Home Improvement Credit is an excellent opportunity for homeowners to save money on their energy bills while also helping the environment. If you've recently made any energy-efficient home improvements, be sure to look into this tax credit and see if you're eligible to claim it. If you have any questions or concerns, don't hesitate to contact us for more information.
Additional Energy Efficiency Incentives
In addition to the federal tax credit mentioned above, there are additional energy efficiency opportunities offered through our Energize Connecticut programs that offer additional rebates or incentives. (Restrictions may apply).
