Treasury and IRS Issue Guidance For Energy-Efficient Home Improvement Credits
The Department of the Treasury and the IRS on Oct. 24 issued Revenue Procedure guidance for product manufacturers and proposed regulations for the Energy-Efficient Home Improvement Credit.
Revenue Procedures for Manufacturers
The document outlines the requirements that manufacturers must follow to be treated as a qualified manufacturer (QM). Beginning in 2025, homeowners will only be able to claim credits for products manufactured by a QM. To become one, a manufacturer must:
- Register and enter into an agreement with the IRS
- Assign a qualified product identification number (PIN) unique to each item of specified property
- Label such items with PINs
- Make periodic reports to the IRS of PINs assigned
Manufacturers will be able to use the IRS Energy Credits Online Portal to register and provide information to the IRS for filing purposes, validation checks, and other risk-mitigation measures.
Energy Efficient Home Improvement Credits
Owners of residential properties placed in service beginning in 2023 may take a credit equal to 30% of the total amount paid for certain energy-efficient products or for a home energy audit.
The credit is limited to certain amounts per taxpayer and per tax year. A taxpayer may claim a total credit of up to $3,200, with a general total limit of $1,200, and a separate total limit of $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and biomass stoves or boilers that meet certain requirements.
The $1,200 general limit also includes additional limitations specific to certain types of property that meet the requirements:
- $600 for any item of qualified energy property
- $600 in total for exterior windows and skylights
- $250 for an exterior door
- $600 in total for exterior doors
- Home energy audits are limited to $150
Beginning in 2025, no credits will be allowed unless an energy-efficient product was produced by a QM and the taxpayer includes the PIN for the item on their tax return.
