Clean Energy Can Cut Your Energy Bills, And Increase Your Tax Refund
Not only can clean energy help lower your energy bills, but it can increase your tax refund too.
This year was likely the first time many Americans were able to get a tax credit for clean energy investments they made in their homes thanks to the Inflation Reduction Act. It’s okay if you missed out this year. With Tax Day behind us, it's time to plan on how to save next year.
There are two tax credits to help consumers save on clean energy upgrades in their homes, Section 25C and Section 25D. Both credits can reduce the cost of clean energy upgrades by up to 30%, but they cover different things.
Section 25C tax credits are capped at $3,200 ($2,000 for heat pumps and $1,200 for other items) and cover energy efficient appliance upgrades, heat pumps, doors, windows, and energy audits. In other words, it covers smaller things in your home that help you save money. They don’t roll over, so you either use them or you lose them. There are some additional limits in there, so make sure you pay attention to the guidelines.
Section 25D tax credits don’t have a specific dollar amount cap. They cover bigger investments, like installing solar panels, battery storage, and geothermal pumps. If you don’t owe enough in taxes to cover the whole tax credit, it rolls over into the next year.
Thinking about making some of these clean energy upgrades in your home? Here are a few examples of how you can save:
A home energy audit would help you find where you can make upgrades to cut energy use and lower your energy bill. You can save up to $150 with the Section 25C tax credit.
You might find that some old doors and windows need to be updated to keep heat in better. You can save on those upgrades with the Section 25C tax credit.
If you’re looking to ditch the A/C and save some money without sacrificing comfort, a heat pump might be the right choice for you. A Section 25C tax credit could help you save up to $2,000 on that.
A solar water heater is another upgrade that can lower your bills and qualifies for the Section 25D tax credit.
If you are looking to make the switch to rooftop solar and battery storage, Section 25D is right for you. You can recuperate up to 30% of the cost with your tax refund.
Thanks to the Inflation Reduction Act’s tax credits, there are new opportunities for homeowners and some renters to get more back in their tax returns and lower their energy bills at the same time. Keep that in mind for next year’s tax season.
Need a quick reference sheet? Download our Section 25 Fact Sheet here. Get the details from the Congressional Research Service here.
