IRS and Energy Efficient Homes

The IRS has outlined guidelines for home energy audits to support taxpayers seeking the Energy Efficient Home Improvement Credit. This credit aligns with the surge in interest in energy-efficient upgrades, coupled with existing energy-related tax deductions, spurred by the Inflation Reduction Act of 2022.

Various clean energy credits were introduced by this Act, each having specific criteria for eligibility and claiming. Notably, the Energy Efficient Home Improvement Credit is available for those who invest in energy-efficient home improvements.

Taxpayers can claim a non-refundable credit of up to $150, representing 30% of the cost, for home energy audits priced at $500 or below. However, it's important to understand that this credit lowers your tax liability but doesn't create a refund.

The credit value is calculated based on expenditures in three categories:

1. Qualified energy efficiency improvements made within the tax year.

2. Expenditures on residential energy property.

3. Costs associated with home energy audits.

The IRS insists that an audit must pinpoint the most effective energy efficiency enhancements for the residence. The audit report should provide estimates of energy and cost savings for each suggested improvement.

Moreover, a written audit report is mandatory, and as of 2024, it's required that the auditor conducting the home energy audit is certified by a program endorsed by the Department of Energy. This certification should be indicated in the audit report.