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aResearch Service
Residential Energy Tax Credits: Changes in
2023
November 21, 2022
P. L. 117-169, commonly referred to as the Inflation Reduction Act of 2022 (IRA), expanded and extended
two nonrefundable tax credits meant to encourage individuals to invest in energy efficiency improvements
or clean energy in their homes:
1. the energy efficient home improvement credit (previously known as the tax credit for
nonbusiness energy property, Internal Revenue Code [IRC] Section 25C), which
subsidizes certain investments that reduce energy consumption in homes; and
2. the residential energy tax credit (previously, the energy efficient property credit, IRC
Section 25D), which subsidizes investments in renewable energy production at taxpayers'
residences.
The IRA also created two grants for states to establish rebate programs to subsidize expenses similar to
those covered by these credits-the HOMES rebate program and the high-efficiency electric home rebate
program. These state programs are not yet operational. The IRA does not prohibit taxpayers from
claiming both a rebate and one of the residential tax credits for the same project, although the rebate may
reduce the expenses eligible for the credit.
Ener gy Efficient Home Improvement Credit (Section 25C)
The Section 25C credit had expired at the end of 2021, but the IRA reintroduced the credit retroactively
for qualifying property placed in service during tax year 2022. For investments placed in service from
2023 through 2032, the credit amount is higher than it was in the past and the scope of qualifying
expenses eligible for the credit is expanded (Table 1.)
Taxpayers typically claim expenses for the credit in the year in which they install the property in their
homes. Expenses related to new home construction are claimed when the original use of the constructed
or reconstructed structure by the taxpayer begins. Separate from the tax credits for individuals investing
in the energy efficiency of their homes, contractors may be able to claim tax credits for constructing new
energy-efficient homes (Section 45L).
Congressional Research Service
https://crsreports.congress.gov
IN12051
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