The Homeowners’ Guide to Energy Tax Credits and Rebates
When you file this year, it’s especially important to reap the benefits of your household’s energy-efficiency. There were a number of changes to the tax code for homeowners that took effect in 2019 and remained available through the 2022 tax year. Those benefits remain available for anyone refiling taxes for those years.
New legislation passed in 2022 will cover energy-related tax credits and rebates starting in the 2023 tax year, so we put together a list of some common home improvement and renewable energy tax credits that may help you save money on your 2023 tax return. We’ve also included information on rebates available for energy-efficient appliance purchases to help you save money if you need or want to use your tax savings on energy-efficient appliances.
What’s a residential energy-efficient property?
To help provide incentives for homeowners to make energy-efficiency home improvements, the federal government offers tax credits as a way to offset the costs of these repairs/changes. This is not cash in your hand (like a rebate which gives you cash back after you’ve made a purchase), but a credit you can claim on your annual tax return that may reduce the federal taxes you pay as a homeowner. For 2023, the tax code remains focused on providing incentives for homeowners to make the move to renewable energy sources, such as the IRS solar tax credit.
Note: Tax credits for home improvements that expired in 2017 were retroactively extended through December 31, 2022. Those currently in place for 2023 have been extended through 2032, but this was done through the Inflation Reduction Act of 2022. In other words, a tax credit that exists today for, say, replacing your hot water heater with a solar water heating system, might not be for the same dollar amount and may have different filing requirements than in past years.
Although the previous tax credits for energy efficient home improvements expire at the end of 2022, you always have the option to refile your return from a previous year you made a qualifying home improvement, going back to 2017. If you are just learning about the available tax credits and did not claim them in years between 2017 and 2022, you are eligible to refile. It is recommended that you consult your tax adviser about your individual tax situation. This guide is meant to provide general information only.
Like federal tax credits, rebates are incentives for consumers — this time from manufacturers and/or power companies rather than the federal government — to upgrade older and likely less energy-efficient appliances with newer models that operate more efficiently. Unlike tax credits, rebates are actual cash — eventually. Yes, some paperwork is required. You generally need to show proof of purchase and model numbers (depending on the type of rebate), but when everything matches up, your rebate will be mailed to your home from either the participating manufacturer or energy company.
What types of appliances qualify for rebates?
While the list changes regularly as manufacturers and power companies offer different options, the following appliances generally qualify for rebates:
- Washing machines
- Refrigerators and freezers
- Residential dehumidifiers
- Room air conditioners
- Water coolers
- Ceiling fans
- Residential ventilation fans
Residential water heater rebates:
- Whole-house tankless water heaters
- Heat pump water heaters
- High-efficiency gas storage water heaters
Heating and cooling equipment rebates:
- Central A/C
- Electric air-source heat pump
- Geothermal heat pumps
- Smart thermostats
Home exterior/interior rebates:
- Roofing products
- Windows, doors, skylights
Lighting product rebates:
- CFL bulbs
- Ceiling fans with lights
- Decorative string lights
- LED lighting
- Light fixtures