This article is reprinted by permission from NerdWallet. If you’ve been holding off on home improvements, a new law signed last year and now in effect as of Jan. 1, 2023, may provide a fresh incentive.
The Inflation Reduction Act, or IRA, includes tax credits and rebates for homeowners who make energy-saving updates to their homes. Credits for improvements like new solar panels, windows, doors and air conditioners are available now, while rebates for larger energy-efficient updates are expected to become available later this year or next year. Here’s what to know about these perks, plus tips to plan your projects.Tax credits for smaller updates The IRA includes tax credits for around-the-house eco-friendly updates. Eligible purchases include energy-efficient windows, doors, insulation, central air conditioners and home energy audits. An IRS fact sheet outlines eligible home improvements. Tax credits reduce your tax liability for the year, says Los Angeles-based certified public accountant Michael DiBernardo. For example, a $500 credit lowers your taxes owed by $500. The new law allows homeowners a 30% tax credit for some energy-efficient updates, capped at $1,200 per year. There’s also a $2,000 credit for heat pumps, heat pump water heaters and biomass stoves. Make the most of it: Combining projects — like new insulation and a heat pump — can get you up to $3,200, says Kara Saul Rinaldi, president and CEO of the energy and environmental strategy firm AnnDyl Policy Group and an advocate of policies that helped shape the IRA. Keep receipts for each eligible update and add them to your tax forms, Saul Rinaldi says. Check out: Dear Tax Guy: I just started renting my house out on Airbnb. What income-tax deductions can I claim on this property?Increased credits for solar panels The IRA also increased the credit fo …