You could be eligible for a tax credit if you made energy-efficient improvements to your home. Unlike tax deductions, which reduce your taxable income and are based on your tax rate, tax credits directly reduce the taxes you owe and don’t depend on your income.
If you’ve installed new energy equipment in your home like solar panels, you may be eligible for the Residential Clean Energy Credit. That credit is worth 30% of the costs of new, qualified clean energy property that’s installed anytime from 2022 through 2032.
The credit is nonrefundable, which means the credit amount you receive can’t exceed the amount you owe in tax. There’s also the Energy Efficient Home Improvement Credit which covers upgrades that reduce home energy use. Improvements like insulation, central air conditioners, and exterior doors may qualify. It’s a 30% credit up to $1,200 for changes made between 2023 and 2032.
There’s even a credit available for installing electric vehicle recharging equipment at your home. The federal tax credit for EV chargers is worth 30% of the costs of the qualifying equipment, up to $1,000 per charging port.
Here’s what you can’t deduct
Homeowners can’t deduct any of the following items, according to the IRS:
- Insurance, including fire and comprehensive coverage, and title insurance.
- The amount applied to reduce the principal of the mortgage.
- Wages paid to domestic help.
- Depreciation.
- The cost of utilities, such as gas, electricity or water.
- Most settlement or closing costs.
- Forfeited deposits, down payments or earnest money.
- Internet or Wi-Fi system or service.
- Homeowners’ association fees, condominium association fees or common charges.
- Home repairs.