Tax Credit for Qualified Insulated Garage Doors

If you're planning a few home improvements that will boost the energy efficiency of your house, you may save some money on your projects under the Inflation Reduction Act (IRA), which was signed into law last year. 

One of the bill's main goals is to address climate change. And while the law is designed to help businesses adopt more eco-friendly measures and jump-start clean energy production, there are also incentives for people to "go green" and save some money.

For example, homeowners can cut their tax bill by installing new energy-efficient windows, doors, water heaters, furnaces, air conditioners, etc. That's because the IRA extends and enhances two tax credits that reward "green" upgrades to your home. 

One of the tax credits that homeowners may be familiar with called the Nonbusiness Energy Property Credit, expired a couple of years ago. However, the IRA brings it back to life, improves it substantially, and even gives it a new name, the Energy Efficient Home Improvement Credit.

The previous, expired credit was worth 10% of the costs of installing certain energy-efficient insulation, windows, doors, roofing, and similar energy-saving improvements in your home. You could also claim the credit for 100% of the costs associated with installing certain energy-efficient water heaters, heat pumps, central air conditioning systems, furnaces, hot water boilers, and air circulating fans. 

However, there was a lifetime limit of $500 for the credit (e.g., credits taken in previous years counted towards the limit). There was also a $200 lifetime limit for new windows. There were also other individual credit limits for air circulating fans ($50); some furnaces and boilers ($150); and certain water heaters, heat pumps, and air conditioning systems ($300).

• Beginning with the 2023 tax year, the credit is equal to 30% of the costs for all eligible home improvements made during the year. 
• It is also expanded to cover the cost of certain biomass stoves and boilers, electric panels and related equipment, and home energy audits. 
• Roofing and air-circulating fans will no longer qualify for the credit, though. 
• Some energy-efficiency standards are updated as well.

In addition, the $500 lifetime limit is replaced by a $1,200 annual limit on the credit amount (the lifetime limit on windows will go away, too). 

So, if you spread out your qualifying home projects, you can claim the maximum credit each year. The annual limits for specific types of qualifying improvements are modified or the better. 

Beginning this year, 2023, they will be:

• $150 for home energy audits;
• $250 for an exterior door ($500 total for all exterior doors);
• $600 for exterior windows and skylights; central air conditioners; electric panels and certain related equipment; natural gas, propane, or oil water heaters; natural gas, propane, or oil furnaces or hot water boilers; and
• $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves and boilers (for this one category, the $1,200 annual limit may be exceeded).

For eligible home improvements after 2024, no credit will be allowed unless the manufacturer of any purchased item creates a product identification number for the item, and the person claiming the credit includes the number on their tax return.

Finally, the revised credit will be extended through 2032.