Page 20 - mar-apr 2023

Federal Income Tax Credits & Incentives for Energy

Efficiency for Homes, Commercial Properties & Builders

he Inflation Reduction Act (IRA) that passed last As far as what is considered a qualified proper-
year provided federal tax credits and deductions ty, the credit extends to existing homes, including second
that help Americans make homes and buildings homes. Rental properties are tricky, though. The IRS allows
Tmore energy efficient, which helps reduce energy for a tenant of a rental property to claim the credit if they
costs while reducing demand as we transition to cleaner en- make improvements, but not the landlord. The factor in
ergy sources including propane. In this article, APGA looks this claim is the resident, who actually lives there makes
at the 2022 tax year and what’s new for the 2023 tax year the claim. Newly constructed homes do not qualify for this
moving forward. credit.
The Section 25C credit had expired at the end of
Savings for Homeowners 2021, but the IRA reintroduced the credit retroactively for
General Overview of the Energy Efficient Home qualifying property placed in service during tax year 2022.
Improvement Credit (Section 25C). The Energy Efficient Through December 31, 2022, for the 2022 tax claim year,
Home Improvement Credit allows for improvements such as the energy efficient home improvement credit had a $500
installing energy efficient furnaces, water heaters, insula- lifetime credit.
tion, doors and windows, as well as home energy audits and For 2022, the residential energy property (10% of
more. All of these are covered by the tax credits and can costs, including labor, up to $150 for each energy efficient
help families save money on their monthly energy bills for appliance) includes propane water heaters, propane furnac-
years to come. Labor costs can be incorporated into these es, and propane water heaters.
calculations, to include onsite preparation, assembly, or For 2023, the residential energy property (30% of
original installation of residential energy property upgrades costs, including labor, up to $600 for each energy efficient
like a propane appliance. appliance) includes propane water heaters, propane furnac-
Propane water heaters, propane furnaces or hot es, and propane boilers.
water boilers must meet or exceed the highest efficiency For 2023 and moving forward, there is no longer
tier (not including any advanced tier) established by the a lifetime limit for the credit; the limits for the credits are
Consortium for Energy Efficiency (CEE) that is in effect as of determined on a yearly basis. The energy efficient home im-
the beginning of the year in which the property is placed in provement credit is increased to 30% for the 2023 tax year,
service.

20 Alabama Propane Gas Association | March / April 2023