Q5. What are the requirements for a home energy audit to qualify for the Energy Efficient Home Improvement Credit?
(added December 22, 2022)
A5. The audit must include an inspection of a dwelling, including condominiums and certain manufactured homes,
located in the United States that is owned or used by the taxpayer as the taxpayer's principal residence. The home
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t (to the taxpayer) that identifies the most significant and cost-effective energy efficiency improvements for that dwelling, including an estimate of the energy and cost savings for each such
improvement. The auditor must meet the certification or other requirements specified by the Department of the
Treasury and the Internal Revenue Service in forthcoming guidance.
Examples
Q1. Can you illustrate how the various credit limits of the Energy Efficient Home Improvement Credit operate? (added
December 22, 2022)
A1. Here are a few examples to illustrate how the Energy Efficient Home Improvement Credit limits work:
Example 1. In one taxable year, a taxpayer purchases and installs the following: two exterior doors at a cost of $1,000
each, windows and skylights at a total cost of $2,200, and one central air conditioner at a cost of $5,000. All property
installed meets the applicable energy efficiency and other requirements for qualifying for the Energy Efficient Home
Improvement Credit.
First, 30% of each $1,000 door’s costs is $300, but the per door limit of $250 applies to reduce the maximum possible
credit for each door to $250 each. Thus, the taxpayer’s expenditures for exterior doors potentially qualify the taxpayer
to claim up to a $500 tax credit.
Next, 30% of the taxpayer’s total $2,200 of expenditures for windows and skylights is $660, but the $600 limit for all
windows and skylights applies to limit the taxpayer’s credit for such expenditures to $600. Thus, the taxpayer’s
expenditures for windows and skylights potentially qualify the taxpayer to claim up to $600.
Finally, 30% of the taxpayer’s $5,000 cost paid for the central air conditioner is $1,500, but the $600 per item limit for
energy property applies to limit the taxpayer’s credit for such expenditures to $600.
Adding these credit amounts yields a sum of $1,700 ($500 + $600 + $600), but the aggregate limit of $1,200 applies to
limit the taxpayer’s total amount of Energy Efficient Home Improvement Credit to $1,200.
Example 2. For this example, assume all the same facts as in Example 1 above, except that instead of purchasing and
installing a central air conditioner at a cost of $5,000, the taxpayer purchases and installs an electric heat pump at a cost
of $5,000. The heat pump meets the applicable energy efficiency and other requirements for qualifying for the Energy
Efficient Home Improvement Credit. Here, 30 percent of the taxpayer’s costs for the heat pump is $1,500, and since the
heat pump is in a category of energy property exempted from both the $600 per item limit and the $1,200 aggregate
limit, the taxpayer can claim an Energy Efficient Home Improvement Credit of $1,500 for the costs of the heat pump
alone.
Accordingly, the taxpayer’s total Energy Efficient Home Improvement Credit is $2,600 ($500 for the exterior doors +
$600 for the windows and skylights + $1,500 for the heat pump).
Example 3. For this example, assume all the same facts as in Example 1 above, except that instead of purchasing and
installing a central air conditioner at a cost of $5,000, the taxpayer purchases and installs an electric heat pump at a cost
of $8,000. The heat pump meets the applicable energy efficiency and other requirements for qualifying for the Energy