Energy Efficiency Rebates and Tax Credits for Home Improvements in 2023

Written By Kenneth Wilson  |  0 Comments

If you're a homeowner planning on renovating, you'll be delighted to know you can get reimbursed for helping the world become greener. In 2023 you can get energy efficiency rebates and tax credits for multiple home improvements, and it's an opportunity you don't want to miss – especially if you're building a new house!

The Inflation Reduction Act was implemented in 2022, allowing rebates and tax credits for energy-friendly building improvements, as the legislation intends to address climate change. The rebates and tax credits also apply to businesses using eco-friendly building methods.

To fully understand what the Inflation Reduction Act covers in terms of home improvements, we'll tell you everything you need to know to get money back for applying greener building methods and home improvements.

Understanding Energy Efficiency Rebates And Tax Credits

The Inflation Reduction Act has many provisions for multiple aspects of its legislation. One aspect focuses on alleviating climate change, reimbursing homeowners and business owners through rebates and tax credits for making eco-friendly building changes and using energy-saving technology.

Rebates are a partial refund for the installation cost for specific eco-centered improvements, and tax credits are deductible amounts on personal or business tax. You can receive rebates or credits for using eligible solar, wind, or geothermal power that generates electricity, heats water, or controls your residence's temperature. You can also benefit from battery storage technology, energy-efficient building methods, and home energy audits.

Available Energy Efficiency Credits For Home Improvements

If you're willing to take the leap to make the world greener, it helps to know that you'll be rewarded for it.

These are the official names of the legislation under the Inflation Reduction Act, which gives you tax credits if you make specific building improvements. Credit will only be awarded if homeowners have a product identification number for the home improvement item, and they must attach it to their tax return.

Energy Efficient Home Improvement Credit

You may know of the Nonbusiness Energy Property Credit, which expired in 2021, but in 2023, better provisions were made for the same concept. You can claim 30% credit for the total cost of purchasing and installing energy-efficient building improvements.

The home upgrades covered include any energy-efficient: heat pumps, water heaters, furnaces, central air conditioning systems, hot water boilers, insulation, windows, doors, electric panels, and biomass stove and boilers.

The credit does not apply to roofing and fans. There is a maximum $1,200 annual limit on your credit amount besides electric/natural gas and biomass heating, stoves, and boilers.

The specific limitations on tax credit include the following:

$150 for energy audits
$600 for natural gas heaters, furnaces, or hot water boilers
$2000 for electric/natural gas and biomass heating, stoves, and boilers
$600 for air conditioners
$600 for skylights and windows
$600 electric panels and related gear

Residential Clean Energy Credit

This credit system reimburses you for installing solar, geothermal, wind, biomass, or fuel cell systems that produce electricity or provide temperature control for your home. In 2023 the credit is at 30% of the cost but limited to $500 per half-kilowatt capacity.

This credit provision will reduce to 26% in 2033, 22% in 2034, and expire in 2034. You get this credit even if you're in a rental home – your only requirement is that you live there!

Alternative Fuel Refueling Property Credit

You'll get a tax credit if you have an electric vehicle and fit a charging station! You can also install a natural gas, propane, hydrogen, or 20% biodiesel fueling device to receive this tax credit. You get 30% of the total cost in tax credit for qualifying systems. Your maximum benefit is $30 000.

High-Efficiency Electric Home Rebates For Home Improvements

If you're a low or middle-income family, the Inflation Reduction Act will reimburse you for going green when you install energy-efficient electric appliances. You can only apply for this rebate if your total household income is 150% lower than the median family income of your area.

The act will cover 100% of the purchasing and installation costs for low-income households (up to $14 000) and 50% of the costs for middle-income households. These rebates have yet to be available, but they will be soon.

The reimbursement covers the following efficiency installations:

  • Wiring
  • Ventilation
  • Water heaters
  • Air sealing
  • Insulation 
  • Upgrading circuit panels
  • Heat pump clothes dryers
  • Electric stoves and cooktops
  • Heat pump HVAC systems

State-Specific Energy Efficiency Rebates Programs

Reimbursement for energy efficiency is not a new thing! Some energy-efficiency programs have been around for years, and there are state-specific encouragements worth taking advantage of. There's likely an energy-efficiency reimbursement program available in your state, so going to your energy office's or utility providers' official websites is worthwhile.

Here are some well-known state rebate programs:

  • New York: The EmPower New York Program is available to homeowners and renters, where the state provides no-cost energy-efficiency upgrades to income-qualifying households. They might even replace your inefficient refrigerator! You can apply online.
  • Texas: If you're in Texas, you might benefit from the LoanSTAR Program, where you can receive a low-interest loan to make your home energy-efficient. If you combine the loan with the new rebate and tax credit benefits, you could win big time!
  • California: If you're a lower-income household, this assistance program will help you with energy-efficient applications such as attic insulation, energy-efficient furnaces, and more.

Tips and Considerations For Homeowners

If you're a homeowner who is renovating or building a house, consider using energy-efficient technology and installations to benefit from rebates and tax credits while saving the planet.

Here are some of the best tips to get the most out of energy efficiency rebates and tax credits:

  • Hire a home energy auditor.
  • Use insulation doors and windows when you build.
  • Speak to your building contractors for advice on energy-efficient home improvements.
  • Research your state's energy office website to see if there are any additional reimbursements.
  • Always research whether your home improvements will be covered under the Inflation Reduction Act.
  • Make sure your energy-efficient appliances have a product identification number; otherwise, they won't be covered under the Inflation Reduction Act.

Final Thoughts

The Inflation Reduction Act makes going green more convenient and allows for your home to be an energy-efficient machine. You may have had energy-related home improvements for a while and can now benefit from them! Always do your research to get the most out of rebates and tax credits. (Related article: Energy Efficient Roofing: What Homeowners Need to Know Before Making a Deposit)

About the Author

I can build it, and I can help you get the patio enclosure you want! I got my start in the Florida patio industry back in the 70s as a young general laborer looking for something to make a few bucks. At the time I never thought it would end up as my career. Over the years I grew beyond the laborer position, becoming a foreman, superintendent, and then into executive management for some of the largest patio contractors, and material vendors. Now into retirement and slightly bored, I offer consulting services to new and existing contractors, and publish this website to help the people who love their patio's and screen enclosures the most - YOU!

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