topic Energy efficiency tax credits under IRA? in Tax law changes

Energy efficiency tax credits under IRA?

ejg12 — Sun, 05 Feb 2023 21:05:24 GMT

I'm in the process of filing my taxes and noticed that the list of energy efficiency deductions available in TurboTax doesn't seem to match the items and corresponding limits in the Inflation Reduction Act. Reading the IRS guidance here, it seems like both the categories and the underlying math for the credit isn't updated to reflect the latest law. Am I missing something or has anybody else noticed this issue too?

Re: Energy efficiency tax credits under IRA?

Vanessa A — Mon, 06 Feb 2023 18:29:50 GMT

Please explain further which credit exactly you are asking about? Which credit are you searching for but not finding?

Re: Energy efficiency tax credits under IRA?

ejg12 — Mon, 06 Feb 2023 19:56:02 GMT

Electric heat pumps and air conditioners specifically - I don't see them listed in the page where you're asked to enter individual cost amounts.

Re: Energy efficiency tax credits under IRA?

Vanessa A — Mon, 06 Feb 2023 20:49:24 GMT

Electric Heat Pumps and Air Conditioners are part of the Energy-Efficient Building Property. To get there using TurboTax Online select the following:

Deductions and Credits
Show More next to your home
Start next to Home Energy Credits
Answer the next couple of pages of questions
When you are asked the Yes and No questions to Energy-Savings Improvements for your Home, if you answer yes to the new construction, you will not get the option to enter the credit as the credit is only for existing homes.
If this was an upgrade for your existing home, enter the amount you paid in the box next to Energy-Efficient Building Property.

Re: Energy efficiency tax credits under IRA?

ejg12 — Tue, 07 Feb 2023 00:03:46 GMT

Thank you - I was able to navigate to this list, but I still don't think the credits are being accurately applied based on the latest legislation and tax guidance.

The FAQ article for this section says "You can get 10% of the cost of energy-efficient building property or $300 (whichever is less) as a tax credit." for energy efficient building property, but the new IRS guidance says these costs are deductible for up to 30% of the cost of each item, for a $3,200 maximum credit. The TurboTax refund seems to max out at $500, which reflects old legislation prior to the Inflation Reduction Act getting passed.

Here's a link to the IRS guidance I'm referencing.

Re: Energy efficiency tax credits under IRA?

JulieS — Tue, 07 Feb 2023 16:23:56 GMT

I think the confusion here stems from the fact that there are two different credits and the names of both have been changed. In addition your reference to the IRS FAQ document also switches back and forth between the two credits.

Residential clean energy credit. The residential energy efficient property credit is now the residential clean energy credit. The credit rate for property placed in service in 2022 through 2032 is 30%.

Energy efficient home improvement credit. The nonbusiness energy property credit is now the energy efficient home improvement credit. The credit is extended to property placed in service through December 31, 2022.

The heat pump and air-conditioning systems fall under the Energy efficient home improvement credit. The new law extended this credit, but it did not increase the limits on the credit. Click here to see the applicable section of the IRS instructions.

Re: Energy efficiency tax credits under IRA?

AmeliesUncle — Tue, 07 Feb 2023 17:24:10 GMT

@ejg12 wrote:
but the new IRS guidance says these costs are deductible for up to 30% of the cost of each item,

Here's a link to the IRS guidance I'm referencing.

You seem to have missed this part:

Through December 31, 2022, the energy efficient home improvement credit is a $500 lifetime credit. As amended by the IRA, the energy efficient home improvement credit is increased for years after 2022, with an annual credit of generally up to $1,200. Beginning January 1, 2023, the amount of the credit is equal to 30% of the sum of amounts paid by the taxpayer for certain qualified expenditures

So your 2022 return follows the $500 rule, not the new 30% rule.

Re: Energy efficiency tax credits under IRA?

ejg12 — Wed, 08 Feb 2023 00:51:00 GMT

Thanks for the responses - this does clear it up and unfortunately I now see the max credit is $500 for 2022.

I also found this document, which provides a helpful comparison between 2022 and 2023 tax year eligibility.