Good news — the IRS has made it cost-efficient to go energy-efficient. If you made your home more energy efficient in the past year, you may qualify for the renewable energy tax credit on your 2020 federal income tax return.
Not sure if you qualify? Here’s everything you need to know about home energy tax credits.
Residential Renewable Energy Tax Credit
How do I qualify?
To qualify, you must have one or more of the following in your primary residence or secondary home:
- Solar panels.
- Solar-powered water heaters. To qualify you for the tax credit, at least half of your home’s water-heating capacity must be solar. The water must be used in your home — solar heating for swimming pools and hot tubs don’t count.
- Wind turbines. However, they only qualify if they generate up to 100 kilowatts of electricity.
- Geothermal heat pumps (they must meet federal Energy Star guidelines to qualify).
- Fuel cells that generate at least 0.5 kilowatts of power for a home using a renewable resource, like hydrogen. Unlike the others, this only qualifies you for a tax credit if installed in your principal residence.
How long will this apply?
If this is the first you’re hearing of this tax credit, you may be tempted to get on the renewable energy bandwagon in the coming year. But will the tax credit still apply if you start now? Fortunately, yes: the credit is good through 2021.
What do I get?
The Residential Renewable Energy Tax Credit probably isn’t the only credit that you qualify for. There is a slew of credits and deductions to help lower your taxable income and reduce the taxes you’ll pay. In fact, there are so many that getting started can feel dizzying.
If you need help, consider enlisting the help of tax preparation experts. Compare tax prep solutions here to get the most out of your tax season!