Inflation Reduction Act and New Construction

Bandit12 — Tue, 24 Feb 2026 06:40:46 GMT

Hi,

My question is: Do the Inflation Reduction Act energy credits (e.g. energy efficient heat pumps) apply to new construction? or just updates to an existing home?

Re: Inflation Reduction Act and New Construction

marctu — Wed, 28 Jun 2023 17:00:53 GMT

This is a nuanced answer. There are two types of Credits.

The first is the Energy Efficient Home Improvement Credit. Under the Energy Efficient Home Improvement Credit: a taxpayer can claim the credit only for qualifying expenditures incurred for an existing home or for an addition to or renovation of an existing home, and not for a newly constructed home. The expenses may qualify if they meet requirements detailed on energy.gov:. They include:

Exterior doors, windows, skylights and insulation materials
Central air conditioners, water heaters, furnaces, boilers and heat pumps
Biomass stoves and boilers
Home energy audits

The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

2022: 30%, up to a lifetime maximum of $500
2023 through 2032: 30%, up to a maximum of $1,200 (biomass stoves and boilers have a separate annual credit limit of $2,000), no lifetime limit

The second is the Residential Clean Energy Property Credit. Under the residential Clean Energy Property Credit: a taxpayer can claim the credit for qualifying expenditures incurred for either an existing home or a newly constructed home.

These expenses may qualify if they meet requirements detailed on energy.gov:

Solar, wind and geothermal power generation
Solar water heaters
Fuel cells
Battery storage (beginning in 2023)

The amount of the credit you can take is a percentage of the total improvement expenses in the year of installation:

2022 to 2032: 30%, no annual maximum or lifetime limit
2033: 26%, no annual maximum or lifetime limit
2034: 22%, no annual maximum or lifetime limit

See: https://www.irs.gov/credits-deductions/home-energy-tax-credits

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Inflation Reduction Act and New Construction

Re: Inflation Reduction Act and New Construction