The IRS put out an article on October 24, 2024, defining guidance for the Energy Efficient Home Improvement Credit. Here is the update!
For home improvement items placed in service beginning in 2023, a taxpayer may take a credit of up to 30% of the amount paid for certain energy efficient products, or the IRS limit on these products, whichever is less.
The IRS general limit for most items is $1,200, and a separate limit of $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves or boilers that meet certain requirements. This means, depending on what you purchase during the year, you may receive a total credit of $3,200.
Within the $1,200 general limit, there are specific limitations on certain types of property:
- $600 for any item of qualified energy property.
- $600 in total for exterior windows and skylights.
- $250 for an exterior door.
- $600 in total for exterior doors.
- $150 limit for home energy audits.
BEGINNING IN 2025, to receive an Energy Efficient Home Improvement Credit, each item of specified property placed in service has to be produced by a Qualified Manufacturer (QM) and the taxpayer must include the PIN for the item on their return.
Qualified Manufacturers (QMs) must fulfill specific requirements to be treated as a QM. Included in these procedures is to register and enter into an agreement with the IRS, assign a qualified product identification number (PIN) unique to each item of specified property, label such items with PINs, and periodically report the assigned PINs to the IRS.