First, the Residential Clean Energy Credit, in place since 2022, provides incentives for clean-energy investments for your home. You can subtract up to 30 percent of the cost of a new clean-energy system—such as solar panels, solar-powered water heaters, geothermal heat pumps, fuel cells, wind turbines, or battery storage technology—from your end-of-year tax bill.
You can include installation and labor costs, and there’s no annual dollar limit for this credit for most projects. You can also carry over any unused credit into future tax years. (While the 30 percent credit is in place until 2032, smaller credits are available under current law for projects undertaken in 2033 and 2034.)
The Energy Efficient Home Improvement Credit, in effect since 2023, rewards certain energy-efficiency upgrades made to existing homes. It provides a maximum credit of $3,200 per year. That’s broken down into two parts. First, there’s a $1,200 max credit for the purchase of certain energy-efficient air conditioners, water heaters, and hot water boilers; insulation; exterior doors; and windows and skylights. You can also get a separate $2,000 max credit for the purchase of certain heat pumps, heat pump water heaters, and biomass stoves/boilers. In general, this credit is valid the year a qualifying product is installed, not merely purchased.
Unlike the clean-energy credit above, this tax credit can’t be forwarded and used in future tax years.
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