IRA Section 13301 – Energy Efficient Home Improvement Credits

Section 13301 of the IRA modifies the “Nonbusiness Energy Property Credit” established in section 25C of the IRC. The credit has been renamed the “Energy Efficient Home Improvement Credit” and extended through through December 31, 2032 for property placed in service after December 31, 2022.

The tax credit is equal to 30% of:

1) the amount paid by a taxpayer (or homeowner) on qualified energy efficiency improvements installed during the applicable taxable year; and
2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during the applicable taxable year.

Qualified energy property means any of the following:

(i) an electric or natural gas heat pump water heater
(ii) an electric or natural gas heat pump
(iii) a central air conditioner
(iv) a natural gas, propane, or oil water heater
(v) a biomass stove or boiler
(vi) any oil furnace or hot water boiler
(vii) any improvement to, or replacement of, a panelboard, sub-panelboard, branch circuits, or feeders

The installation of any of the above must satisfy the conditions provided in Section 13301 in order to qualify for the tax credit (e.g., National Electric Code, Energy Star, or Consortium for Energy Efficiency requirements). Taxpayers must also acquire the qualified energy property from qualified manufacturers, who must include a qualified product identification number to the product/s. The taxpayer must substantiate its claims by providing information required by the Treasury Department in the tax return, in order to avail of the tax credit.

Section 13301 of the IRA removed the lifetime limit to avail of the tax credit, but put in place a $1200 credit limit for each taxable year, as well as various credit limits for different types of qualified energy property, doors, windows, and other building components.