Yes, there is a limit on the amount of the Energy Efficient Home Improvement Credit that you can claim. The credit is structured with specific limits based on the type of improvement or expenditure. The key points regarding these limits are as follows:
- The overall annual credit limit for qualified energy efficiency improvements and residential energy property expenditures is $1,200. This includes insulation materials, air sealing materials, exterior doors, windows and skylights, central air conditioners, natural gas, propane or oil water heaters, furnaces or hot water boilers, improvements or replacement of electrical systems, and home energy audits.
- There is a separate annual credit limit of $2,000 for heat pumps, heat pump water heaters, biomass stoves, and biomass boilers. This is distinct from the $1,200 limit and applies specifically to these items without a lifetime limitation.
- Specific limits within the $1,200 overall limit include:
- A limit of $600 for any single qualified energy property item.
- A combined limit of $600 for all exterior windows and skylights.
- A limit of $250 for any single qualifying exterior door, with a total limit of $500 for all qualifying exterior doors.
- A limit of $150 for home energy audits.
- The maximum total yearly energy efficient home improvement credit amount, combining both the $1,200 and $2,000 limits, can be up to $3,200.
- It's important to note that any amounts financed through subsidized energy financing cannot be used to calculate the energy efficient home improvement credit.
These limits are determined on a yearly basis, meaning there is no lifetime limit for the credit; taxpayers can claim the maximum allowed credit every year that eligible improvements are made, up to the year 2032.
Sources:
IRS FAQ
§ 25C. Energy efficient home improvement credit
IRS FAQ
FS-2022-40
IRS FAQ
Instructions for Form 5695 (2023)
Publication 530 (2023)
