Daylight Savings Time is Ending: Save Money with These Energy Tax Tips

As the days draw shorter and Daylight Savings Time comes to an end, it’s a reminder the end of the year is almost here.

As the temperature drops, you’ve probably already turned on the heat for the first time this fall (we just got our whole system serviced in preparation), and it’s time to start thinking about energy bills. Winter is coming, and here’s how to prepare!

The good news about saving energy is that you can also save money at the same time and see a tax benefit. A few years ago, we replaced all the windows in our home because they were falling apart and leaking. We were able to leverage a tax credit to help defray the cost and reduce our energy bills. It was a win-win situation.

You want to do what you can to use less energy year-round, but especially during the winter. There are energy-saving ways to improve your home’s tax efficiency. The residential clean energy credit  is a credit available that you still have time to put into place before the end of the year and increase your tax refund:

Residential Clean Energy Credit

This is a tax credit that can be quite valuable. You can receive 30 percent of the cost of energy-efficient equipment you purchase from January 1, 2022, through December 31, 2032.  

It’s important to note that this credit isn’t refundable, so you won’t get money back if the credit is worth more than what you owe. However, it is possible to carry the credit forward to the next year, so it isn’t wasted.

If you have a $2,000 credit but only owe $1,500, you can apply the $1,500 this year and then carry the remaining $500 forward, reducing your tax liability next year.

Qualified systems include solar electric panels, solar hot water heaters, wind turbines, fuel cells, battery storage technology, and geothermal heat pumps. Installation in your principal home and second home qualify; just make sure that you check to see if the system meets the requirements. It’s important to note that your second home must be located in the United States, and you live in part-time but don’t rent to others. You can not claim a credit for fuel cell property on your second home or for a home not in the United States. 

Home Energy Audits 

To qualify, the home energy audit must be a written audit report and identify the most significant and cost-effective energy efficiency improvements to the residence. When having a residential energy audit done make sure that it meets all the requirements. Your audit should be completed by a qualified auditor and the written audit report should include that the auditor is certified to conduct home energy audits. 

The credit amount is equal to 30% of the total amount paid during the year for a home energy audit. The maximum credit that can be claimed for home energy audits is $150 (30% credit on audits that cost up to $500). This credit is also non-refundable, which means that it will reduce the amount you owe to the IRS down to zero, but any remaining credit won’t be refunded to you. 

Energy Efficient Home Improvement Credit 

The Energy Efficient Home Improvement Credit is worth up to $1,200 per year for a qualifying property placed in service on or after January 1, 2023, and before January 1, 2033. The credit now has an annual limit rather than a lifetime limit, so you can claim the maximum annual credit every year that you make eligible improvements until 2033. This credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes, and you can not apply any excess credit to future years. 

Generally, to receive this energy-efficient home improvement credit, the home must be your primary residence located in the United States and an existing home that you improve or add onto but can not be a new home. 

Don’t worry about knowing these tax laws. TurboTax will ask you simple questions about you and give you the tax deductions and credits you are eligible for based on your entries. Meet with a TurboTax Full Service expert who can prepare, sign, and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.

9 responses to “Daylight Savings Time is Ending: Save Money with These Energy Tax Tips”

1. 

   I converted my oil fired boiler to a more efficient gas boiler. Will that qualify for a tax credit?

   Reply
2. 

   We rent a condo in Hawaii and bought a Delonghi Portable Air Conditioner that is energy effecient. Can we deduct this?

   Reply
3. 

   We just replaced our water heater in may, how do we ck to see if ours if eligible? Do you need to have receipts? We had a friend install ours and we didn’t get any.

   Reply
   • 

     Hi Ally,
     Under the Residential Energy Efficient Property Tax Credit you can get a credit of up to 30% of your cost for solar water heaters. The Nonbusiness Energy Property Credit expired on 12/31/2013 and is awaiting vote to see if it will be extended. You don’t need to include your receipt with your tax return, but you should have it to prove your deduction.
     Thank you,
     Lisa Greene-Lewis

     Reply
4. 

   I enjoyed reading your energy saving tips!.

   Reply
5. 

   Are home improvements tax deductible such as patio covering to protect and cool the house?

   Reply
   • 

     Hi Harlan,
     Unfortunately that type of improvement would not qualify for a tax deduction. It can only be added to the cost basis of your home. You can visit http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
     to find out which improvements are eligible.
     Thank you,
     Lisa Greene-Lewis

     Reply
     • 

       I live in an apartment and recently purchased new energy efficient home appliances fridge, stove, ice chest, led bulbs, etc. can I claim those in my taxes? I also had a lot of work done to improve living conditions GFI outlets, sealed windows, panted entire apartment, new sink, facets and had a contractor do all the work? can labor be deducted in taxes?
     • 

       Hi Arturo,
       Unfortunately you can only get tax credits for energy efficient improvements made on a home that you own.
       Thank you,
       Lisa Greene-Lewis