Earn tax credit for energy-saving improvements

January 2024

Happy New Year from all of us at NeighborWorks of Grays Harbor! Not only do we want to wish you well in 2024, we also hope to bring you good news!

For many of us, the holidays put a strain on our budgets. With tax time around the corner, this news will encourage homeowners who have made energy efficiency investments this year: You may be eligible for energy efficient home improvement tax credit that could lower your tax bill.

For people who make certain energy-efficient improvements in their home during the 2023 calendar year, it is possible to qualify for a tax credit up to $3,200.

A tax credit means you won’t have to pay as much in taxes. After what you owe the federal government in taxes is determined, an eligible tax credit is a dollar-for-dollar reduction in your tax bill. (When you have a tax credit, the amount of money you owe goes down the same dollar amount. However, this credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes. Also, you can’t apply any excess credit to future tax years.)

According to the Internal Revenue Service (IRS) website, www.irs.gov, beginning Jan. 1, 2023, the tax credit is 30 percent of certain qualified expenses. including qualified energy efficient improvements installed during the year, residential energy property expenses and home energy audits.

If you didn’t make any of those improvements in 2023, knowing about this program, which will last through 2032, may make a difference as you plan for household improvements in the future.

The maximum credit that can be claimed each year is $1,200 for energy property costs and certain energy efficient home improvements including insulation and air sealing materials or systems, with a $250 limit per door ($500 total), $600 limit on windows and skylights, and $150 limit on home energy audits.

In addition, there is up to $2,000 allowed each year for qualified heat pumps, biomass stoves or biomass boilers.

Residential energy property

Residential energy property that meets outlined energy efficiencies, can qualify for a credit up to $600 per item installed. The “qualified property” includes new central air conditioners, natural gas, propane or oil water heaters; natural gas, propane or oil furnaces and hot water boilers.

Heat pumps and biomass stoves and boilers

Heat pumps and biomass stoves and boilers must have a thermal efficiency rating of 75 percent or more to qualify for the credit of up to $2,000 per year. 

Which houses qualify?

To qualify, the home must be your primary residence (the one you live in most of the time). It must not be a new home, but one that you are improving or adding onto.

Also, the home improvements must meet energy efficiency standards and be new – not used – systems and materials.

To claim the Energy Efficient Home Improvement Credit, file form 5695, Residential Energy Credits Part II with your tax return. (Or ask your tax professional to do that on your behalf.) The tax credit must be claimed in the year the energy efficient materials

were installed, not just purchased.

Medical improvements to home

In another category entirely, home improvements that are prescribed by a doctor, things such as wheelchair ramps or making a bathroom handicapped accessible, may be deductible as medical expenses. Check with your tax professional.

We are not experts

While we are neither lawyers nor tax experts, we wanted to bring these potential money savings to your attention. Check with the experts including the IRS itself, for more specific answers for your tax and deductible-expense questions.

Thanks for a great 2023

We are so grateful here at NeighborWorks of Grays Harbor that we live in such a caring and giving community. We are especially thankful this past year for the thoughtful collaboration, referrals, ideas and support that come from our local nonprofits working to provide affordable housing and shelter.

These include Coastal Community Action program, Grays Harbor County Public Health, Habitat for Humanity, The Moore Wright Group, Chaplains on the Harbor and others. We would also like to recognize these local businesses that have supported our mission with generous monetary donations that allow us to offer specialized services such as Housing Counseling, the eHOME online homebuyer course and re-hab construction services at zero or reduced costs. These include Bank of the Pacific, 1st Security Bank, Timberland Bank and Twin Star Credit Union. If you or your business would like to support our mission of providing affordable and sustainable housing services, please contact NeighborWorks to discuss becoming one of our supporting partners.