Who’s ready to make some home improvements while also saving money on taxes? Yup, it’s us.
In this article, we lay out some of the best ways you can make your home more energy efficient (which will save you money on your energy bills) while also making you eligible for some great credits and deductions on your tax bill.
Ready? Let’s take a look to help you start saving.
If you own your home and your roof gets a lot of sunshine throughout the day, installing solar panels can be a great way to start saving on your electric bill while also getting big savings on your taxes. We have a longer write-up about all the considerations of going solar, but, in brief, you can qualify for federal, state, and local tax credits, and get big savings on your electric bill going forward.
Efficient heating and cooling systems
Yes, new heating and cooling systems might cost a pretty penny initially, but think of the long-term savings on your monthly energy bills. For example, air-source heat pumps can cut your electricity use by 50% compared to baseboard or furnace heaters.
Under the 2023 Energy Efficient Home Improvement Credit, you can enjoy up to a combined $3,200 in tax benefits for installing energy-efficient improvements like central AC, electric or natural gas, heat pumps and new insulation.
Here’s something many homeowners overlook: insulation. Old or ineffective insulation can take a hefty toll on your energy bills. The EPA estimates that by sealing your home or adding insulation to your crawl spaces or attic, you can save 15% on heating and cooling costs.
Upgrading to energy-efficient insulation might also make you eligible for the Nonbusiness Energy Property Credit. That’s less drafty winters, cooler summers, and a happier wallet.
Have you seen that little blue Energy Star label on appliances? They’re not just there to look good. Energy Star-certified products meet stringent energy efficiency guidelines set by the EPA, making them super effective at using energy and saving you money over time.
For instance, an Energy Star refrigerator is 15% more energy efficient than a standard model, making it a cost-effective way to reduce your monthly energy costs. Similarly, an Energy Star-certified dishwasher costs less than $35 to run annually, saving 1,900 gallons of water, which can lower your monthly water bill.
Windows are more than just your view into the outside world. Old, leaky windows can make your heating and cooling system work harder than necessary. Investing in energy-efficient windows can save a lot in the long run.
For instance, Energy Star-certified windows can help you save between $101 and $583 per year. Over 15 years, this can add up to between $1,500 and $8,745 in total savings. Under the Energy Efficient Home Improvement Credit, energy-efficient windows can earn up to a $600 credit, and doors up to $500!
An energy-efficient water heater that uses natural gas, oil, or propane can save you a surprising amount on your utility bills. They also qualify for a tax credit under the Energy Efficient Home Improvement Credit.
But water savings don’t stop there. You can buy low-flow toilets, shower heads, and faucets for around $10 to $20 each, which can help you see savings of between 25% and 60%. Some local governments even offer rebates or tax credits for these items, so they’re worth considering.
Get a high return on your energy-efficient investments
Before you jump into these improvements, chatting with a tax advisor is a good idea. Tax laws can be tricky, and the last thing we want is to bank on a credit that doesn’t apply to your situation. Make sure you understand the IRS guidelines on what improvements qualify for tax credits and if there are any state programs you can also take advantage of.
If you want to find more ways to save and make the most of your money, why not join the WorkMoney community? We’re all about helping you take control of your finances, whether through finding direct discounts and proven products that save you money or advocating for policies that put money back in your pockets.
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