Energy Efficient Home Improvement Credit with State Incentives

[ColoRock]

In 2024, I installed insulation in my home that would typically qualify for the federal energy efficiency tax credit. Initially, I thought I couldn’t claim the credit because I was reimbursed for the cost. However, while researching whether a door replacement would be eligible, I came across information from the IRS that made it seem like I could still claim the credit on the insulation, even though a state incentive covered the cost.

The organization that reimbursed me is a 501(c)(3) nonprofit, primarily funded by state and county grants, with a smaller portion coming from private donations (as best I can tell from their website and 501(c)(3) filings).

I'm unsure how to proceed in this situation and would appreciate some guidance.

[Vanessa A]

Generally, no you cannot, but it depends on the type of reimbursement, how it is treated and how much it covered of your total cost. 

If  you received a reimbursement or grant from the state or county for insulating your home, if it did NOT cover the full cost, then you can include the part of the cost that was NOT covered by the county grant.

If the entire cost of your home insulation was covered by another organization, then you cannot claim the credit as this would be like double dipping.  In order to claim the credit, you must actually pay the expense.  If you were already reimbursed for the entire cost, the organization that reimbursed you actually paid the expense.  

An exception to this would be if you received a 1099-G for the reimbursement.  Then this would be included in your taxable income and then you would be able to claim the credit as you would have in a sense paid for it through income that is included on your return. 

Coordinating DOE Home Energy Rebates with Energy-Efficient Home Improvement Tax Credits: An Explaine...

[ColoRock]

This definitely makes sense and was what I expected based on every other tax incentive I've seen. I was just confused when I saw that there were exceptions for state incentives, but couldn't find clear details.

Basically, if you receive 1099-G (which, I won't), report that as income, but claim the energy efficient home tax credit to offset some/all of that income. If you don't receive an 1099-G, don't claim anything that was reimbursed (regardless of who reimbursed or how the entity is funded).

I did go through the prompts in TurboTax (Deluxe) just to see if it would guide me to this outcome, but it never asked if I had received any kind of reimbursements nor did it suggest to deduct any. Kind of expected more guidance there, but oh well.

Thanks!