06 Jun It Pays to be Energy Efficient — But How Much and What Qualifies?

There are tax incentives to update old and inefficient domestic appliances. Here’s what you need to know about what’s available to you!

“We’re the government, and we’re here to help!” No, really – The Internal Revenue Service has instituted a number of home energy credits designed to put money back in your pocket if you replace older, more inefficient home comfort appliances with newer, more energy efficient models.

And the best part: these incentives don’t expire until 2033 and can be used each year for all applicable work and installations.

Altogether, homeowners could save up to $3,200/year with applicable tax credits on related expenses. That’s up to a collective $1,200/year on the installation of qualifying air conditioners, water heaters, furnaces and boilers. And up to $2,000/year on qualifying heat pumps. There are also considerations for costs related to home inspections, doors, windows and insulation — but we’ll focus on the appliances tied to the credits.

Air Conditioners, Water Heaters, Furnaces and Hot Water Boilers

According to the IRS: “residential energy property that meets the Consortium for Energy Efficiency (CEE) highest efficiency tier… qualifies for a credit up to $600 per item.”

The “up to $600 per item” is determined by 30 percent of related/qualified costs. So, if the cost of installation was $1,000, you’d be eligible for $300 and so on… capping out at $600.

When you look at the fine print — while multiple categories are eligible and could conceivably exceed $1,200 — the tax form does not let you collectively go higher than $1,200. So, this highlights how smart planning — doing some upgrades this year, and some upgrades next year — could lead to the optimization of the tax credit.

Ask an associate at Cliff Bergin & Associates for more information on qualifying products for your home.

Heat Pumps Bring the Heat of Additional Savings

The IRS has placed greater weight on replacing older heat pumps with newer, more efficient heat pumps with an efficiency rating of at least 75 percent. Qualified costs, including labor and installation, may be credited up to 30 percent with a maximum of $2,000. This includes electrical or natural gas heat pumps, electrical or natural gas heat pump water heaters, and biomass stoves and boilers.

How Long Do We Have?

These tax credits are available now through January 1, 2033. And again, it’s important to remember, that you can qualify for the credit each year — so spacing out services and installations may benefit you and your tax liability!

Your friendly partners at Cliff Bergin & Associates will be happy to work with you on reviewing and providing all necessary justification for qualifying purchases and services.

We know that no one likes thinking about taxes in July, but planning now may help you lower your tax liability.