Maximizing Home Renovation Tax Credits Through Energy Efficiency

You may already know that home renovations and improvements can help you save money on your energy bill. But did you know that you can also get home improvement deductions on your taxes?

Through home renovation tax credits, certain home updates and capital improvements can qualify. Here in Wisconsin, thrifty Midwesterners are conscious of every penny. Here’s how you can make your home improvements improve your bottom line this tax year.

What Are Home Renovation Tax Credits?

The Energy Efficient Home Improvement Tax Credit is an incentive available to most United States taxpayers (including all of us here in Milwaukee). It’s a way for the government to encourage homeowners to make energy-efficient improvements to their homes—improvements that can ultimately benefit their community and the environment.

Now, when you think of “energy-efficient home improvements,” you might think of solar panels and other somewhat lofty updates. While these qualify, some other very basic updates can also help you qualify for tax savings.

It’s important to note that any tax decisions should be made with your accountant or a tax expert. Not every situation qualifies for the tax credit, so you should do some targeted research on your specific circumstances and plan before you start to think of ways to spend that tax return from Uncle Sam.

The Energy Efficient Home Improvement Tax Credit is also a credit, not a deduction. In many ways, this benefits taxpayers because a credit reduces your tax bill (whereas a deduction reduces your taxable income, which may or may not result in greater tax savings).

So how much can you save? It depends on the home improvement projects and updates. As of January 2023, the credit is 30% of qualified expenses for eligible taxpayers. Several energy improvement updates can qualify. If you work from home, consider exploring a home office deduction and other incentives for home repairs.

If you’re considering home improvements and exterior updates, it’s a good idea to look at it as a long-term investment. Home renovations can reduce your energy consumption, make your house more comfortable, save you time on maintenance, AND save some dollars come tax season.

Qualifying Energy-Efficient Home Improvements

Once again, it’s crucial to discuss your tax situation with a professional. In general, the qualifying energy-efficient home improvements include the following updates.

1. Insulation:

Insulation and air-sealing materials can qualify for tax benefits and credits. The improvements must meet the standards of the International Energy Conservation Code (IECC). It’s also important to note that the credit may only apply to your primary residence (not a rental property) and must be updated to an existing home rather than a new build.

2. Energy-Efficient Windows:

Exterior windows and skylights can qualify for a tax credit of up to $600. The windows need to meet Energy Star requirements and other parameters to qualify. If you’re considering updates through Weather Tight, talk to your representative (and follow the advice of your tax professional) to confirm that your replacement windows are eligible for savings.

3. Energy-Efficient Entry Doors:

Choosing energy-efficient and Energy Star-rated entry doors can help you qualify for a credit of $250 per door, up to $500 total. If you’re working with your Weather Tight representative on new entry doors, explore qualifying options to help you save at tax time.

4. H/E Heating and Cooling:

There are several high-efficiency heating and cooling updates that may qualify. HVAC professionals should be able to guide you through the latest Energy Star-rated equipment. Many new central air conditioners, gas, propane, and oil water heaters, furnaces, and boilers can qualify.

5. Home Energy Audits:

Another home energy tax credit option is to have a home energy audit performed by a qualified home energy auditor. When they visit your home, they’ll review its energy efficiency and suggest the areas where you could make the most cost-effective improvements.

How to Qualify for Energy Tax Credits & Save

As you can see, several different ways to qualify for tax credits exist. You can use the guidelines on the IRS website to ensure you qualify. Once you’ve made your documented purchase of home improvement updates, you’ll be able to fill out Form 5695 with your tax filings to claim your credit.

You may also want to look at incentives and programs offered through the Wisconsin state government and supporting organizations. Certain improvements (like installing solar energy systems) can offer rebates, tax breaks, and state deductions as well.

How much will you save on your eligible improvements? Potentially several hundred dollars or more. If you’re already planning to make energy-efficient home improvements, then it just makes sense to include them in your tax filings.

Energy efficient improvements can also help you save in many other ways. Beyond the immediate tax credit, you’ll typically notice a significant reduction in your energy bill and utilities. New windows and doors also help you save wear and tear on your furnace and A/C because you’ll need less temperature control. Not to mention, you’re investing in your home’s value.

One of the things we often hear from customers is, “Why did I wait so long to do this?” Although it might not be as impactful on your wallet, you’ll be amazed at how much improvements like new windows and doors improve the comfort of your home.

If your home temperature doesn’t seem consistent if you’re constantly adjusting the thermostat or reaching for a sweater, your windows and doors are likely to blame. Air infiltration can significantly change your home’s temperature, making it too hot in the summer and too cool in the winter.

Investing in home improvement updates is a wise choice that can pay for itself in terms of the value of your home, comfort, energy savings, and that extra tax credit! If you’re ready to save on your home, reach out today! Our Weather Tight representatives will happily show you the beautiful options for new windows, doors, and other valuable home improvements.