Earth Day Climate Action Guide - Home Improvements
Looking to make home improvements? The Inflation Reduction Act provides many ways to take climate action in your own life and save money.
The Inflation Reduction Act is historic climate legislation passed in 2022. It includes both consumer tax credits and rebate programs to make energy saving upgrades to your home. The Energy Efficient Home Improvement Credit gives consumers tax credits for making energy efficient upgrades to their existing homes and the Residential Clean Energy Credit gives tax breaks for the installation of clean energy equipment to both new and existing homes. The rebates will provide further financial incentives, and are being rolled out on a statewide level.
This guide summarizes each upgrade and gives next steps for how to implement them. The upgrades are keyed in with a symbol to help you understand which credit or incentive each topic belongs to. See the legend below for the different types of incentives that are available or will be available soon.
The tax credit limits and caps can be confusing! Check out our explainers to help you make the most of your home renovation project.
Find information below on the individual elements you might want to incorporate into your home improvement project and the incentives that can help you pay for it!
HOME ENVELOPE
HOME AUDIT
WHAT IS IT? Inspection of your home’s energy use and a recommended plan of action to improve it. Click here to see what to expect during a home audit.
THE INCENTIVE: Tax credit for conducting an energy inspection of your home to prioritize where to make upgrades.
Note: This is a great place to start before doing any other upgrades on your home!
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost, up to $150.
Annual cap of $1,200 with other upgrades.
No lifetime limit.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
ENERGY SAVING HOME UPGRADE
WHAT IS IT? Energy efficient retrofits modeled to achieve or having achieved minimum energy use reductions.
THE INCENTIVE: Home Efficiency Rebate program that will be rolled out by state energy offices.
WHO/WHAT QUALIFIES?Improvements made to single and multifamily residences. New construction is not eligible. Any income bracket is eligible.
HOW MUCH MONEY? Energy savings of 35% or more: the lesser of $4,000 or 50% of project costs.
Energy savings of 20-34%: the lesser of $2,000 or 50% of project costs.
Energy savings of 15% or more: the lesser of $100 per percent of energy saved or 50% of project cost.
*Low-income households (less than 80% AMI) are doubled, or up to 80% of project costs.
HOW TO CLAIM: Rebates are not yet available. Check for your states updates here.
INSULATION
WHAT IS IT? Material used to reduce the flow of thermal energy.
THE INCENTIVE: Tax credit for insulation and air sealing materials or systems that meet IECC standards in effect at the start of the year 2 years before installation.
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of the cost, up to $1,200, with other upgrades.
No lifetime limit and labor to install NOT included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
WINDOWS
WHAT IS IT? Windows designed to minimize the use of heating and cooling systems in your home.
THE INCENTIVE: Tax credit for windows that meet the ENERGY STAR Most Efficient criteria.
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost, up to $600
Annual cap of $1,200 with other upgrades.
No lifetime limit and labor to install NOT included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
DOORS
WHAT IS IT? Exterior doors that save energy, reduce heating/ cooling needs and improve comfort.
THE INCENTIVE: Tax credit for the installation of exterior doors that meet ENERGY STAR requirements.
WHO/WHAT QUALIFIES? Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost, up to $500 per year (up to $250 per door).
Annual cap of $1,200 with other upgrades.
No lifetime limit and labor to install NOT included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
SKYLIGHTS
WHAT IS IT? Skylights designed to minimize the use of heating and cooling systems in your home.
THE INCENTIVE: Tax credit for skylights that meet the ENERGY STAR Most Efficient criteria.
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost, up to $600
Annual cap of $1,200 with other upgrades.
No lifetime limit and labor to install NOT included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
HEATING AND COOLING
GEOTHERMAL HEAT PUMPS
WHAT IS IT? They provide heating and cooling by using underground temperatures to efficiently exchange heat.
THE INCENTIVE: Tax credit for the installation of geothermal heat pumps.
WHO/WHAT QUALIFIES Improvements made to existing or new primary residences and qualifying second homes.
HOW MUCH MONEY? 30% of cost until 2032, 26% in 2033 and 22% in 2034.
No annual maximum or lifetime limit and labor to install is included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 1.
Note: Excess credit DOES carry forward to future tax years.
ELECTRIC
HEAT PUMPS
WHAT IS IT? They provide both heating and cooling by using electricity to transfer heat.
THE INCENTIVE: Tax credit for heat pumps that meet specific energy star requirements.
WHO/WHAT QUALIFIES Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $2,000/year in combination with other credits.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
CENTRAL AC
WHAT IS IT? Air conditioning system that circulates cool air through supply and return ducts.
THE INCENTIVE: Tax credit for AC that meets Consortium for Energy Efficiency (CEE) highest efficiency tier.
WHO/WHAT QUALIFIES Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $600.
Annual cap of $1,200 with other upgrades.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
BIOMASS STOVE/
BOILERS
WHAT IS IT? They use organic matter to heat a home or heat water.
THE INCENTIVE: Tax credit for biomass stoves/ boilers with a thermal efficiency rating of at least 75%.
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $2,000/year in combination with other credits.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
BOILERS
WHAT IS IT? Heats water and distributes either hot water or steam to heat your home.
THE INCENTIVE: Tax credit for furnaces that meets Consortium for Energy Efficiency (CEE) highest efficiency tier.
WHO/WHAT QUALIFIES Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $600.
Annual cap of $1,200 with other upgrades.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
FURNACES
WHAT IS IT? Heats air and distributes it through ductwork.
THE INCENTIVE: Tax credit for furnaces that meets Consortium for Energy Efficiency (CEE) highest efficiency tier.
WHO/WHAT QUALIFIES Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $600.
Annual cap of $1,200 with other upgrades.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
WATER HEATERS
SOLAR WATER HEATERS
WHAT IS IT? Powered by solar energy, they heat and store water for your home.
THE INCENTIVE: Tax credit for the installation of SRCC certified solar water heater.
WHO/WHAT QUALIFIES Improvements made to existing or new primary residences and qualifying second homes.
HOW MUCH MONEY? 30% of cost until 2032, 26% in 2033 and 22% in 2034.
No annual maximum or lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 1.
Note: Excess credit DOES carry forward to future tax years.
GAS/PROPANE/ OIL WATER HEATERS
WHAT IS IT? Powered by a fuel source, they heat and store water for your home.
THE INCENTIVE: Tax credit for installation of a water heater that meets Consortium for Energy Efficiency (CEE) highest efficiency tier.
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $600.
Subject to an annual cap of $1,200 in combination with other upgrades.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
HEAT PUMP WATER HEATERS
WHAT IS IT? They use electricity to move heat from one place to another to heat water in your home.
THE INCENTIVE: Tax credit for heat pump water heaters that meet specific energy star requirements.
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $2,000/year in combination with other credits.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
ELECTRIFICATION
SOLAR PANELS
WHAT IS IT? Device that absorbs the suns energy and converts it to electricity or heat to be used in your home.
THE INCENTIVE: Tax credit for the installation of code compliant solar panels.
WHO/WHAT QUALIFIES Improvements made to existing or new primary residences and qualifying second homes.
HOW MUCH MONEY? 30% of cost until 2032, 26% in 2033 and 22% in 2034.
No annual maximum or lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 1.
Note: Excess credit DOES carry forward to future tax years.
ELECTRICAL PANEL
WHAT IS IT? The main hub where electricity is sorted and distributed to your home.
THE INCENTIVE: Tax credit for qualifying improvements to the electric panel to support the installation of other energy upgrades.
WHO/WHAT QUALIFIES?Improvements made to existing primary residences.
HOW MUCH MONEY? 30% of cost up to $600.
Subject to an annual cap of $1,200 in combination with other upgrades.
No lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 2.
Note: Excess credit DOES NOT carry forward to future tax years.
WIND TURBINE
WHAT IS IT? A device that uses energy from the wind to generate electricity.
THE INCENTIVE: Tax credit for installation of a wind turbine to provide electricity in your home.
WHO/WHAT QUALIFIES Improvements made to existing or new primary residences and qualifying second homes.
HOW MUCH MONEY? 30% of cost until 2032, 26% in 2033 and 22% in 2034.
No annual maximum or lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 1.
Note: Excess credit DOES carry forward to future tax years.
FUEL CELLS
WHAT IS IT? A device that produces clean electricity by using the chemical energy of hydrogen or other fuel.
THE INCENTIVE: Tax credit for installation of qualifying fuel cells to provide electricity in your home.
WHO/WHAT QUALIFIES Improvements made to existing or new primary residences.
HOW MUCH MONEY? 30% of cost until 2032, 26% in 2033 and 22% in 2034.
The maximum credit is $500 per half kilowatt (kW) of power capacity for single occupancy. Combined credit for all residents can't exceed $1,667 per each half kilowatt of fuel cell capacity.
Labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 1.
Note: Excess credit DOES carry forward to future tax years.
ELECTRIFYING & APPLIANCE UPGRADES
WHAT IS IT? High efficiency electrification and appliance upgrades.
THE INCENTIVE: Home Electrification and Appliance Rebate program that will be rolled out by state energy offices.
WHO/WHAT QUALIFIES? Taxpayers in the low or moderate income bracket, less than 150% AMI who install qualifying Energy Star electrification equipment.
HOW MUCH MONEY? Max $14,000 per home.
<80% AMI - 100% percent of electrification project costs.
80% - 150% AMI - 50% of costs for moderate-income households.
COMPONENT REBATES:
Electric heat pump water heater—up to $1,750
Electric heat pump—up to $8,000
Electric heat pump clothes dryer—up to $840
Electric stove, cooktop, range, or oven—up to $840
Electric panel—up to $4,000
Electric wiring—up to $2,500
Insulation, air sealing, and ventilation—up to $1,600
Labor Costs Included.
HOW TO CLAIM: Rebates are not yet available. Check for your states’ updates here.
BATTERY STORAGE
WHAT IS IT? A device that stores excess electricity for later consumption.
THE INCENTIVE: Tax credit for installation of battery storage in your home with capacity of at least 3 kilowatt hours.
WHO/WHAT QUALIFIES Improvements made to existing or new primary residences.
HOW MUCH MONEY? 30% of cost until 2032, 26% in 2033 and 22% in 2034.
No annual maximum or lifetime limit and labor to install IS included.
HOW TO CLAIM: Click here for Tax Form 5695. Fill out part 1.
Note: Excess credit DOES carry forward to future tax years.
*The various pieces of legislation like the Inflation Reduction Act are being rolled out over the coming months and how authorities are implementing these programs is an evolving process so stay tuned as information is updated on this website.