Does rental income property qualify to take Energy Tax Credit 2023?

[MG26]

Hello! I'm renting out a residential property as Qualified Business Income. I'm buying a new furnace for it and need to select which model to try to have installed.  Can landlords can take the Energy Tax Credit as per the Inflation Reduction Act? I get conflicting information in regards to possible requirement of property needing to  be primary residence. If so, it needs to be rated with Energy Star tier 1,2,3 (I think).  If not, I'll just get the cheaper model.

[charlietax22]

yes, according to IRS tax code EVEN RENTERS QUAILIFY, I guess turbo tax 2022 ARE WRONG COMPLETELY

[Opus 17]

Yes and no.

The energy credits you are thinking of are found in Section 25C and Section 25D.  These only apply to someone who uses the property as their residence.  For section 25C credits, you must own the home and use it as your main residence.  For section 25D, you don't need to be an owner or use the property as your main residence, you just have to use the property as a residence.

The credit for an efficient furnace is found in section 25C, which requires you to own the home and use it as your principle residence.. If you are a landlord, you don't qualify for section 25C unless you live in the home as your main residence (such as, it has multiple units and you live in one of the units.)

However, there are separate investment credits found in the tax code section 48 and section 179D that might apply to landlords.  I don't know anything about how to qualify or what forms to use to claim the credits.  Here are some links to start your research.

https://www.energystar.gov/about/federal_tax_credits

https://www.rocketlawyer.com/real-estate/landlords/property-management/legal-guide/incentives-to-imp...

[Opus 17]

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@charlietax22 wrote:

yes, according to IRS tax code EVEN RENTERS QUAILIFY, I guess turbo tax 2022 ARE WRONG COMPLETELY

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Please be more careful.  Section 25D credits are allowed for taxpayers who pay for improvements to a home they use as a residence, even if they don't own it and don't use it as their main residence.  However, section 25C (which applies to the furnace suggested by this taxpayer) requires that the taxpayer own the home and use it as their main residence.

In addition, neither section 25D or 25C applies to a landlord who does not live on the property. 

[charlietax22]

He is the IRS tax code website fs-2022-40

[Opus 17]

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@charlietax22 wrote:

He is the IRS tax code website fs-2022-40

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Exactly.

"For example, landlords can never use these credits for improvements made to any homes they rent out but do not use as a residence themselves."