Updated FAQs were released to the public in Fact Sheet 2025-01 PDF, Jan. 17, 2025. This fact sheet contains all of the FAQs in one downloadable PDF.
Background
The Inflation Reduction Act of 2022 (IRA), amended the energy efficient home improvement credit under §section 25C of the Internal Revenue Code (Code) and the residential clean energy credit under §section 25D of the Code. These FAQs provide details on the IRA's changes to these tax credits, information on eligible expenditures, and examples of how the credit limitations work. In this update to the FAQs, questions have now been separated by Code section.
General overview of the Energy Efficient Home Improvement Credit
Through Dec. 31, 2022, the Energy Efficient Home Improvement Credit had a lifetime credit of $500 . As amended by the IRA, for years after 2022, the credit is increased, with an annual credit of generally up to $1,200 (per taxpayer per taxable year), but with no lifetime credit limit. . Beginning January 1, 2023, the amount of the credit is equal to 30% of the sum of amounts paid by the taxpayer during the taxable year for: (1) qualified energy efficiency improvements installed during the taxable year, (2) residential energy property expenditures, and (3) home energy audits. There are limits on the allowable annual credit and on the amount of credit for certain types of expenditures (see A1 and A2 in the section titled Qualifying expenditures and credit amount). The credit is allowed for qualifying property placed in service on or after Jan. 1, 2023, and before Jan. 1, 2033.
Enery Efficient Home Improvement Credit (§ 25C)
- Energy efficient home improvement: Qualifying expenditures and credit amount
- Energy efficient home improvement: Energy efficiency requirements
- Energy efficient home improvement: Qualifying residence
- Energy efficient home improvement: Labor costs
- Energy efficient home improvement: Timing of credits
- Energy efficient home improvement: Qualified manufacturers
- Energy efficient home improvement: PIN requirements
- Energy efficient home improvement: General questions
- Energy efficient home improvement: Examples - How the credit limits work
General overview of the Residential Clean Energy Property Credit
The residential clean energy property credit is a 30-percent credit for certain qualified expenditures made by a taxpayer for residential energy efficient property. The IRA extended the residential clean energy property credit through 2034, modified the applicable credit percentage rates, and added battery storage technology as an eligible expenditure. The credit applies for property placed in service after December 31, 2021, and before January 1, 2033. The credit percentage rate phases down to 26 percent for property placed in service in 2033, 22 percent for property placed in service in 2034, and no credit is available for property placed in service after December 31, 2034.
Residential Clean Energy Credit (§ 25D)
- Residential clean energy property: Qualifying expenditures and credit amount
- Residential clean energy property: Energy efficiency requirements
- Residential clean energy property: Qualifying residence
- Residential clean energy property: Labor costs
- Residential clean energy property: Timing of credit
- Residential clean energy property: General questions
Previous updates to FAQs
- Fact Sheet 2024-15 PDF, April 17, 2024
- Fact Sheet 2022-40 PDF, Dec. 22, 2022