Is a home energy audit tax deductible?

Among other goals, the IRA aims to provide accessible clean energy to American homes and reduce greenhouse gas emissions while saving taxpayers money each year in energy costs and delivering a range of tax incentives and rebates.

For example, the IRA amended and expanded Section 25C of the tax code, which provides a credit for certain home energy efficiency improvements and property. This “Energy Efficient Home Improvement Credit” now includes home energy audits.

Here are some key details on how the home energy audit credit works:

  • You can claim 30% of the cost paid for a qualifying home energy audit, up to $150 max per tax year. So, for a $500 audit, the credit would be $150.
  • The audit must be conducted on your primary U.S. residence and identify cost-effective upgrades for that specific home, including estimated energy and cost savings.
  • The credit is non-refundable, meaning it can lower your tax bill but won’t result in a refund.
  • For costs paid in 2023, the rules are relaxed. But for 2024 and beyond, stricter requirements apply for auditor certification and the audit report content.
  • The home energy audit credit counts toward an overall $1,200 limit per year for all 25C credits combined.

The 25C credit also applies to many energy-efficiency home improvements. So, you can combine the audit credit with upgrade credits to maximize incentives.

Now, let’s explore the home energy audit credit details and requirements.

How do you claim the energy credit?

Follow these steps to ensure you qualify for and properly claim the home energy audit tax credit:

1. Confirm you qualify

This credit applies to an audit of your main U.S. residence. For the purposes of tax law, your main home is typically where you live for the majority of the year.

You’ll also want to verify that you have sufficient tax liability to benefit from this non-refundable credit — it can lower your tax bill but won’t generate a refund.

2. Schedule with a certified home energy auditor

Make sure to book your audit with an auditor that meets IRS certification requirements, which vary by year.

For audits in 2023: No special certification is required yet. The audit report also does not need to state the auditor’s credentials.

The IRS granted this leniency to allow taxpayers to take advantage of the new credit while giving the home energy audit industry time to meet the full qualification requirements starting in 2024.

Audits in 2024 and beyond, however, must be completed by an auditor certified through an IRS-approved program.

The Department of Energy (DOE) lists IRS-qualified auditors. Your chosen auditor should state their certification in the audit report.

3. Complete comprehensive home energy audit.

Your home audit should conform to the requirements for identifying cost-effective upgrades and estimated savings specific to your home. It must also follow industry standards and best practices.

4. Receive complete audit report.

Your auditor should provide a detailed written audit report signed by them.

For 2024 and beyond, this report must also state:

  • The auditor’s name and tax ID number
  • Which IRS-approved certification program they are certified under

Be sure to retain this report and all documentation showing evidence that you completed a qualifying home energy audit, including receipts showing the amount you paid. Be sure to follow all IRS recordkeeping requirements.

5. Claim credit when filing taxes

When filing your taxes for the year you completed the audit, claim your credit by submitting Form 5695. Have your report available in case it’s needed.

Also, ensure your total 25C credits, including the home audit credit, stay under the $1,200 annual limit.

These steps will help you maximize savings while adequately qualifying for the home energy audit tax credit.

What are some common questions about the home energy audit tax credit?

Many taxpayers still have lingering questions about specific details of the home energy audit tax credit.

Here are answers to some common questions:

  • Can renters claim the home energy audit tax credit? Renters can claim the credit for an audit of their primary U.S. residence. Tax law determines your “main home” based on where you reside for the majority of the year, regardless of ownership.
  • Can a taxpayer claim the home energy audit credit multiple years in a row? You may claim the $150 home audit credit each year as long as you pay for a new qualifying audit of your current main U.S. residence. You cannot claim a credit for the same audit spanning multiple years.
  • What exactly must the home energy audit report include? To qualify for the credit, the report must identify cost-effective upgrades tailored to your home, along with estimated energy and cost savings for each. It must also follow industry standards and best practices.
  • If you claim the home energy audit tax credit, can you still claim credits for efficiency improvements too? The $150 home audit credit counts toward the overall $1,200 limit for all Section 25C credits combined. But you can claim additional credits up to $1,200 for eligible efficiency improvements beyond the audit. The 25C credit also applies to solar panels, heat pumps, water heaters, stoves, boilers and more.
  • When does the home energy audit tax credit expire? The Section 25C Energy Efficient Home Improvement Credit, including the home energy audit credit, expires on December 31, 2032. So, you must complete eligible audits and upgrades by then to qualify for these credits.

For further details on eligible clean energy tax credits, the IRS website provides extensive resources. The Treasury Department also published a helpful fact sheet on the Section 25C residential credits worth reviewing.

Is the home energy audit worth it?

Completing a comprehensive home energy audit provides long-term benefits beyond just the $150 tax credit. An audit identifies high-impact upgrades tailored to your home’s needs, allowing you to create a customized roadmap to enhanced efficiency and comfort.

Plus, coordinating your audit with energy efficiency improvements maximizes potential incentives. The Section 25C credit also offers tax credits covering 30% of the costs for many upgrades like insulation, air sealing, windows, doors, water heaters, HVAC systems, and more.

With the audit guiding recommended improvements and the upgrade credits helping offset costs, you can experience enhanced savings and value from home energy projects.

However, don’t forget that the relaxed auditor certification rules only apply for 2023. For audits in 2024 and beyond, be sure to carefully follow the stricter IRS requirements detailed above.

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