The Internal Revenue Service released information on how taxpayers can claim the energy efficient home improvement credit under the Inflation Reduction Act.
The IRS released Notice 2023-59, which outlines the rules for doing home energy audits so taxpayers can claim the tax credits. The notice announces the upcoming proposed regulations and offers interim guidance regarding home energy audits for purposes of the energy efficient home improvement credit under Section 25C of the Tax Code, as well as a transition rule for certain home energy audits conducted during tax years ending this year.
The Inflation Reduction Act created several clean energy credits. Each credit comes with its own requirements for the kinds of clean energy property or service and how to claim them. The IRS and the Treasury have been providing guidance over the past 12 months spelling out the details. One of them is a nonrefundable energy efficient home improvement credit for taxpayers’ main residences.
The amount of the credit comes out to 30% of the total paid by taxpayers throughout the year for qualified energy efficiency improvements installed, residential energy property expenditures and home energy audits. The maximum amount for home energy audits is $150, so taxpayers can claim a 30% credit on audits that cost as much as $500. The home energy efficient home improvement is nonrefundable, so it can only decrease the amount of tax owed and won’t create a refund.
Michael Nagle/Bloomberg
The IRS guidance details the rules for claiming the home energy improvement credit and how to do a home energy audit, including estimating the energy and monetary savings for each improvement. Taxpayers have to substantiate that a qualified auditor performed their home energy audit. To satisfy that mandate, the written audit needs to say the auditor is certified to conduct the home energy audit. Home energy auditors need to give a written audit report to the taxpayer.
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