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Tax Credits

Understanding the 25c Tax Credit

Discover how you can make your home more energy-efficient while enjoying significant tax benefits

The Basics

The 25c tax credit is an incentive offered by the federal government as part of the 2022 Inflation Reduction Act encouraging homeowners to make energy-efficient upgrades to help reduce the effects of climate change. The 25c credit offers homeowners the opportunity to claim up to $3200 annually to offset the costs associated with making qualified upgrades to their homes.

Where Can I Save?

One of the first questions homeowners often ask is,“What improvements qualify for the 25c tax credit?”
Here are some of the key areas where you can make upgrades and claim this credit:

  • Heat Pump ($2000)
  • Tankless water heater ($600)
  • Insulation ($1200)
  • Windows and Doors ($500-$600)
  • Energy Audit ($150)
  • Electric Panel ($600)

The credit has no lifetime dollar limit. You can claim the maximum annual credit every year that you make eligible improvements until 2033.

How Much Can I Save?

Did you know that over 50% of a home’s energy use is spent on heating and cooling with water heating coming in a close second? By upgrading your home’s water heater to an approved Energy Star model, you can save nearly $500 annually. Meanwhile, the US Department of Energy estimates that an investment into energy-efficient HVAC systems can help save as much as 40% annually on monthly utility bills.

With utility bills averaging $375 per month in Indiana a 20-40% monthly savings add up to be significant over time.

Who Qualifies?

Thanks to the expansion of the 25c tax credit, homeowners can now make upgrades that take a big bite out of their carbon footprint and get a tax credit for doing so.

Qualification is simple with any primary residential home, excluding new builds, being eligible for tax incentives or rebates under the Inflation Reduction Act.

Claiming the 25c tax credit is a relatively straightforward process. You’ll need to save all receipts and manufacturer’s certifications for the improvements made. When you file your federal income taxes, you will also need to file Form 5695, Residential Energy Credits Part II with your tax return to claim the credit. You must claim the credit for the tax year when the property is installed, not just purchased.

Remember to work with your tax professional to ensure proper compliance.

How Can Legacy Help?

Legacy has been helping our customers save money and enjoy greater comfort by installing high-quality, energy-efficient HVAC systems, heat pumps, and tankless water heaters.

To learn more and get a quote, call your trusted technician for a consultation. Our team will help you make a plan for upgrades that fits your needs and budget. Contact us now to get started on your path to lower energy costs today!

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