Consumers might not expect the IRS of all people to come to their rescue regarding the cost of energy. But the agency has issued a notice laying out the requirements for home energy audits for any taxpayer who wants to claim the Energy Efficient Home Improvement Credit.
In addition to the growing interest in solar-powered homes and pre-existing tax deductions for energy improvements, the Inflation Reduction Act of 2022 created a number of clean energy credits.
There are requirements for each of these credits, including what type of clean energy property or service must be purchased and how it must be claimed. In addition, taxpayers can receive a non-refundable Energy Efficient Home Improvement Credit if they purchase and install certain energy-efficient home improvements.
The maximum credit for home energy audits is $150, meaning that taxpayers can claim a 30% credit on audits that cost up to $500. Keep in mind that this is a credit – not a refund – meaning that it can only reduce the amount of tax you owe and will not create a refund.
The credit amount is equal to 30% of the total amount that a taxpayer pays during the tax year for these three things:
Qualified energy efficiency improvements installed during the year
Residential energy property expenditures, and
Home energy audits.
The “must have” in the IRS’ eyes is that any audit a taxpayer has performed must identify the most significant and cost-effective energy efficiency improvements to the residence. The agency needs to see an estimate of the energy and cost savings for each improvement.
Another must is that the home energy auditor must provide a written audit report to the taxpayer. And that's not all.
“When obtaining a home energy audit make sure that it meets the credit requirements,” the IRS reminds consumers.
“Specifically, starting in 2024, taxpayers will need to substantiate that a qualified auditor conducted their home audit. To satisfy this requirement, the written audit should state that the auditor is certified by one of the certification programs listed on the Department of Energy certification programs for the Energy Efficient Home Improvement Credit page to conduct the home energy audit.”
If you think an energy audit is worth tax savings, you can find more information about the Inflation Reduction Act credits and deductions here.