This story is part of Taxes 2023, CNET's coverage of the best tax software, tax tips and everything else you need to file your return and track your refund.
The Inflation Reduction Act of 2022 created many new tax breaks for home energy efficiency. While most of the big incentives will arrive in future years, the sweeping law makes a few key changes that will affect your taxes during this current tax season.
Adding alternative energy to your home provides the biggest tax break, but simple improvements to oil or gas appliances or structural items like windows and doors can also give you money back this tax season.
There's also a tax credit for installing alternative energy charging stations for electric vehicles in your home.
We'll go over the current tax credits for energy improvements and tell you how to claim them on your taxes.
For more tax tips, check out all the possible tax breaks for homeowners and what to do if you haven't received your W-2 form yet.
What are the current tax breaks for home energy improvements?
The IRS currently allows two main tax credits for improving energy efficiency at home -- the energy efficient home improvement credit and the residential clean energy property credit.
The first credit deals with improvements to energy efficiency in your home, while the second focuses on alternative energy projects like solar panels or wind turbines. To qualify for either credit, home improvements must be made to a primary residence.
The energy efficient home improvement credit
Formerly called the nonbusiness energy property credit, the energy efficient home improvement credit provides taxpayers: 1) a flat amount of $50 to $300 for the installation of certain Energy Star-certified devices, and 2) 10% of costs back for certain energy improvements. For home improvements in either of these two categories during the years 2005 to 2022, you can claim a total of $500, which is the lifetime limit in credit for improvements made before Jan. 1, 2023.
Here are the current amounts you can get back on your 2022 tax return for Energy Star-certified devices installed in 2022:
Tax credits for home energy improvements in 2022
|Energy Star-certified product||Energy efficient home improvement credit|
|Furnace (gas, propane or oil)||$150|
|Advanced main air circulating fan (for furnace)||$50|
|Hot water boiler (gas, propane or oil)||$150|
|Hot water heater (gas, propane or oil)||$300|
|Central air conditioning||$300|
|Air-source heat pump||$300|
You can also get 10% back on "qualified energy efficiency improvements" to:
- Windows and skylights
For the above energy efficiency improvements, there's a $2,000 limit, so the effective maximum tax credit is $200 (or 10% of $2,000). Keep in mind that you can't include installation costs for those improvements, and the new components must be expected to last at least five years, according to the IRS.
For improvements made in 2023 through 2032, which you'll claim on future tax returns, the Inflation Reduction Act bumps that limit to $1,200 annually, with a separate $2,000 annual limit for water heaters, heat pumps, biomass stoves and biomass boilers.
The residential clean energy credit
Changes to the residential clean energy credit apply to this tax season. You'll get a 30% tax break for expenses related to qualified improvements that use alternative power like solar, wind, geothermal or biomass energy.
(The tax credit had dropped to 26% in 2021, but the IRA pushed it back up to 30% from Jan. 1, 2022 until Jan. 1, 2033.)
Property that can qualify for the residential clean energy credit includes:
- Solar electricity
- Solar water heating
- Wind turbines
- Geothermal heat pumps
- Biomass fuels
- Fuel cells
There's no limit on the residential clean energy credit except for fuel cell property, which is restricted to $500 for each one-half kilowatt of capacity.
What about the tax credit for electric vehicle charging stations?
Another credit impacted by the Inflation Reduction Act is the alternative fuel vehicle refueling property credit, a tax break for homeowners who install green energy charging stations. The credit expired at the end of 2021, but it's been revived for 2022 and extended until the end of 2032.
Electric vehicle charging stations qualify for the credit, as well as fueling stations that primarily use ethanol, natural gas, liquefied petroleum gas or hydrogen.
If you installed an electric vehicle charging station or another alternative fuel source at your home in 2022, you could qualify for 30% back for hardware and installation costs, up to a maximum of $1,000.
How do I claim green energy tax credits on my 2022 taxes?
The best tax software will help identify all of your tax credits, usually with a question-and-answer process, and automatically plug them into your tax return. If you complete your return without answering questions about home improvements, be sure to search for those credits or use the software's help section to identify how to claim them.
For filing your taxes on paper, Form 5695, "Residential Energy Credits" takes care of both the residential clean energy credit (Part I) and the energy efficient home improvement credit (Part II). Form 8911 should be used to claim the alternative fuel vehicle refueling property credit.
For more tax tips, learn why you should create an online IRS account and how to track your tax refund.