Did you know that some of your home improvement upgrades may be tax deductible? If any of the changes that you made have to do with energy efficiency, you may have the good fortune of saving on your taxes.
The tax credit offered to homeowners is called the Nonbusiness Energy Property Credit. You can take the credit through the year 2019. After that point, the credit may be reduced slightly each year until its disappearance in 2021.
The renovations that will provide you with a tax credit are any equipment changes that increase the efficiency of your home. In other words, they decrease your carbon footprint on the environment by decreasing the frequency that your home uses energy.
A few of the most common changes include:
- Solar panels
- Solar powered water heaters
- Wind turbines
- Solar electric equipment
How Much Can you Deduct?
The tax credit for energy efficiency changes to your home is a surprising 30%. That’s one of the larger credits offered by the IRS. The 30% is the cost of the equipment plus installation. You don’t have to worry about an upper limit, either. You can deduct as much as 30% off the total cost without a limit.
You can deduct the costs of energy efficient changes on both your primary and second homes. This is unlike many other deductions pertaining to your home. The IRS usually limits you to just your primary residence since that is the one that you live in most of the time.
Other Equipment That May Qualify
Even if you make smaller changes to your home that affect its energy efficiency, you may be able to deduct the cost of the renovations on your taxes.
These changes include:
- The addition of insulation
- Changing out the doors and windows for more energy efficiency
- Adding skylights
- Replacing the roof with a more energy efficient material
In order for any of the above to qualify for an energy efficiency credit, the manufacturer must prove that the items meet the energy efficiency requirements.
While you shouldn’t make home improvements just because you can get a tax credit, it certainly can help the situation. When you know you will get back 30% of the cost of the renovation, it helps make the changes more affordable. Since energy efficiency changes will also help lower your utility bills and the wear and tear on your utilities, it can be a helpful credit that motivates you to make your home more energy efficient.