Renovate, reduce, and receive; renovate your home, reduce your carbon footprint, and receive tax breaks, it is all possible thanks to the 2022 Inflation Reduction Act (IRA) and other related local laws. You may be able to save thousands of dollars annually and according to the IRS, it is estimated that up to nine million people missed out on these benefits in 2021. Let's break down how you can be saving in taxes, in bills, while reducing your carbon footprint. 

Tax Incentive Terms to Know:

One of the reasons people do not take advantage of tax incentives is lack of understanding of the terminology. Here are some terms you need to know.

  • Tax Credit: These are direct reductions in your tax bill.

  • Tax Incentive: These, like other incentives, encourage taxpayers to take specific actions, like installing energy-efficient appliances, or solar water heaters in exchange for a reduction in their taxes.

  • Home Improvement Tax Deduction: Qualifying home improvements that are eligible for tax deductions.

Tax Deductible Home Improvements

Many home improvements are not going to qualify for tax breaks. Home maintenance like replacing a roof or a drain field are capital improvements, which can increase the value of your home, but do not qualify for breaks. However, the updates below confer immediate benefits in 2023.

Energy Efficiency Tax Credits

Saving energy conserves resources, and your personal funds. Under the IRA there are clean energy tax credits, which are dollar for dollar monies back, that help you achieve both.


  • Heat Pumps: Switching to an energy-efficient heat pump can earn you a 30% tax credit, up to $2,000.

  • Windows and Doors: Replace doors and windows for a 30% credit on the cost (increased from 10% in the previous year). The credit is capped at $600 for windows and $500 for two doors.

  • Insulation: Upgrade your insulation for a 30% credit (up from 10% last year).

  • Electrical Upgrades: Up to 30% of the cost for an electric panel upgrade, up to $600.

  • Solar Panels: This is one of the most asked questions. Installing solar panels gets you a 30% credit, a savings of up to $6,000 based on the average cost of a rooftop solar installation.

  • Home Energy Audit: Not sre where to start? Even an audit will earn a credit of up to $150 to offset.


It is important to note that there are also incentives on line items like solar, energy storage, and electric vehicles.

Home Office Upgrade Tax Deduction

If a portion of your home is used exclusively for business purposes, you may be eligible to deduct a portion of your mortgage interest, property taxes, and other related expenses. This is not a catch all and the IRS has very specific rules for what qualifies as a home office.

You can calculate this deduction using either of these methods:

  • Regular Method: Determine the percentage of your home used for work, then based your deduction on this percentage and figure whether expenses are direct or indirect.

  • Simplified Method: Calculate the square footage of your home office and multiply it by $5 per square foot, up to 300 square feet, with a maximum deduction of $1,500.

Attention Multi Generation Home Owners: Medical Improvements

Medical upgrades that are prescribed by a doctor, including wheelchair ramps or accessibility features, are deductible as medical expenses. The IRS provides a list of qualifying capital expenses, including widening doorways, relocating electrical devices, adding handrails, and grading the exterior.

Rental Property Investments

Improvements made to rental properties fall under a deduction category called depreciation. These are standard deductible business expenses. They are also subject to specific rules and limits, so before making significant upgrades, consult a tax attorney.

Federal vs. State Home Improvement Tax Incentives

In some cases, you may qualify for multiple tax breaks for the same project according to federal and state laws. For example, for some upgrades you may be entitled to a federal tax credit, a state-level incentive, and a rebate from your local utility company.

If you are thinking about home improvements, rental improvements, home office upgrades, medial improvements, all in the name of reducing your carbon footprint, you are going to have a lot of assistance in the form of rebates, incentives, and credits in 2023. It is critically important to consult with a tax professional prior to investing in substantial upgrades. If you would like recommendations and more information on incentives and homeowning in the Research Triangle Park, stay informed and in touch with My NC Homes.


Posted by Larry Tollen on

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