On December 22, 2022, the IRS issued new FAQs on its website that provide guidance regarding the Energy Efficient Home Improvement Credit under IRC §25C and the Residential Clean Energy Property Credit under IRC §25D.
The FAQs provide clarification on the credit limits, qualifying expenses, and timing for claiming the credits, and provide examples. Key points from that guidance include:
- Starting with the 2023 taxable year, property qualifying for the Energy Efficient Home Improvement Credit is generally eligible for a $1,200 annual credit, but some property is eligible for a $2,000 annual credit. The two categories of property can be combined to produce an annual credit of up to $3,200;
- Roof repairs are generally not eligible for the Residential Clean Energy Property Credit, but the installation of solar shingles that serve as both roofing material and solar energy property qualify for the credit;
- Neither credit can be claimed until the year the installation of qualifying property is completed, even if the taxpayer paid for the improvements in a prior year;
- Renters who pay for qualifying improvements can claim the credits, even though they do not own the real estate upon which the qualifying property is installed; and
- Some property eligible for each of the credits is only eligible if the property is installed on a principal residence, while other eligible property can be installed on any personal use residence (such as a second home). Rules related to homes that have mixed personal and business use are also discussed.
The FAQs are available at:
www.irs.gov/pub/taxpros/fs-2022-40.pdf
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