I wanted to share a few updates with readers on energy tax credits for renewable energy projects for 2021 and 2022. Energy tax credits may not sound like the most exciting or inclusive topic, but there are 2 types of credits – one is very easily obtainable, while the other is more difficult, but potentially significant. Both types of energy tax credits were extended with the Consolidated Appropriations Act of 2021 passed by Congress in December of 2020. However, only one of the 2 is currently still in effect for 2022, while the other expired at the end of 2021.
2021 & 2022 Energy Tax Credits for Renewable Energy
The “Renewable Energy Tax Credit” can result in a significant credit of 26% of the costs of major renewable energy installations in both 2021 and 2022. These credits were expanded and extended through 2023 with the Consolidated Appropriations Act of 2021. The Renewable Energy Tax Credit is unlimited (there is no cap), and in addition to equipment, it includes labor on installations for the following:
- solar energy systems (solar water heaters and solar panels and photovoltaic)
- geothermal heat pumps
- small wind turbines
- fuel cells
- biomass fuel stoves (new in 2021)
Before the most recent Congressional extension, the Renewable Energy Tax Credits were set to phase out on the following schedule for residential installations:
- 2019: 30%
- 2020: 26%
- 2021: 22%
- 2022: 0%
Post extension, the Renewable Energy Tax Credits phase out on the following new schedule:
- 2019: 30%
- 2020: 26%
- 2021: 26%
- 2022: 26%
- 2023: 22%
- 2024: 0%
The installations must be installed in a home you own and use as a residence (no rentals, but second homes qualify).
These energy tax credits are non-refundable, but can be carried-over to a future tax filing year. More information can be found on the Energy Star Renewable Energy Tax Credit site.
2021 Equipment Tax Credits for Primary Residences (aka “Home Energy Efficiency Tax Credits”)
The very popular and easily obtainable non-business residential “Energy Property Tax Credit” for Energy Star certified energy efficiency improvements on principal residences was previously extended through 2021 with the Consolidated Appropriations Act of 2021. The Energy Property Tax Credit has about a dozen names, so I’ll highlight a few of them here to avoid confusion:
- “Energy Property Tax Credit”
- “Non-Business Residential Energy Property Tax Credits”
- “Residential Energy Property Tax Credit”
- “Home Energy Efficiency Tax Credit”
- “Home Efficiency Tax Credit”
- “Equipment Tax Credits for Primary Residences” (how it’s listed on the Energy Star website)
Whatever you want to call it, these popular energy efficiency tax credits equal 10% of the cost of product to $500, or a specific amount from $50–$300 for the following eligible items:
- HVAC Main Air Circulating Fan: $50 for fans that use less than 2% of a furnaces energy.
- Central Air Conditioning: $300 for Split Systems: with SEER ≥ 16 and EER ≥ 13, or package systems with SEER ≥ 14 and EER ≥ 12.
- Gas, propane, or oil furnaces and fans: $150 credit with AFUE ≥ 95.
- Gas, propane, or oil hot water boiler: $150 with AFUE ≥ 95.
- Insulation: 10% of the cost, up to $500 (not including installation costs). Includes air sealing caulk, spray foam, house wrap, and weather stripping.
- Roofs: 10% of the cost, up to $500 (not including installation costs) on metal roofs with appropriate pigmented coatings and asphalt roofs with appropriate cooling granules that also meet ENERGY STAR requirements.
- Gas, Oil, or Propane Hot Water Heater: $300, in the case of a storage water heater (20-55 gallons), an energy factor of at least 0.82 or a thermal efficiency of at least 90%.
- Electric Heat Pump Water Heater: $300 with Energy Factor ≥ 2.2.
- Windows, Doors & Skylights: 10% of the cost, up to $500, but windows are capped at $200 (not including installation costs). Must be ENERGY STAR certified.
If your previous year (2021) purchase of one of these items met the criteria above, you’re eligible for the credit. Moving forward, if you want to buy any of these types of products, it would be wise to focus on the above specs when doing so, so you are eligible for the tax credit, should it be renewed. More info. can be found on the Energy Star site.
2022 Equipment Tax Credits for Primary Residences (aka “Home Energy Efficiency Tax Credits”)
Legislation has not yet passed to extend the Equipment Tax Credits for Primary Residences into 2022. Historically, this credit has been passed at the end of the calendar year retroactively (which is particularly unhelpful if you are trying to plan ahead for the tax credit). The 2021 legislation was the first it was extended at the beginning of the year in a long time. If there are any updates for 2022, I’ll share them here.
My suggestion is to not wait, if you have plans to update. The chances are good this credit will be extended. And, if it’s not, you’ll likely still make your money back over time and reduce your impact on the environment.
How to Claim the Equipment Tax Credit for Primary Residences:
2021 & 2022 Energy Tax Credits Discussion:
- Have or will you claim the Renewable Energy Tax Credit? Please share the cost, savings, and any other details of your project in the comments.
- Have or will you claim the Non-Business Energy Property Tax Credit? What project did you take on?