Can You Claim Energy Efficient Appliances on Your Taxes?

Upgrading to energy-efficient appliances can lower utility bills and reduce environmental impact, but many homeowners also wonder if these purchases come with tax benefits. The U.S. government offers incentives for certain energy-efficient upgrades, potentially allowing taxpayers to claim credits or deductions.

Understanding which appliances qualify and how to file for these tax benefits is essential to maximizing savings.

Who Qualifies

Eligibility depends on the type of property, the taxpayer’s filing status, and whether the purchase meets efficiency standards set by the Department of Energy or the Environmental Protection Agency. Homeowners who install qualifying appliances in their primary residence are the main beneficiaries. These incentives generally do not apply to second homes or rental properties unless specific conditions are met.

Income level does not typically affect eligibility, but taxpayers must have enough tax liability to claim nonrefundable credits. If the credit exceeds the taxes owed, it cannot be carried forward unless explicitly allowed by the tax code. Some state programs, however, offer refundable credits or rebates that provide financial benefits regardless of tax liability.

Appliances must meet federal energy efficiency criteria, often requiring ENERGY STAR certification. However, not all ENERGY STAR products qualify for federal tax credits. The IRS updates its list of eligible products periodically, so homeowners should verify requirements before purchasing.

Eligible Appliance Types

Not all energy-efficient appliances qualify for tax benefits. The IRS primarily offers credits for appliances that improve home energy efficiency, particularly those related to heating, cooling, and energy conservation.

Heating and Cooling Systems

Heating, ventilation, and air conditioning (HVAC) systems are among the most commonly covered appliances. The Inflation Reduction Act of 2022 extended and expanded the Energy Efficient Home Improvement Credit, allowing homeowners to claim up to 30% of the cost of qualifying HVAC systems, with annual limits.

For example, heat pumps and high-efficiency air conditioners may qualify for a credit of up to $2,000, while furnaces and boilers have a lower cap, typically around $600. To qualify, these systems must meet efficiency ratings set by the Department of Energy, such as the highest efficiency tier of the Consortium for Energy Efficiency. Installation costs for these systems are generally included in the credit calculation.

Refrigeration Equipment

Refrigerators and freezers with high energy efficiency ratings may qualify for state or utility company rebates but are not typically eligible for federal tax credits. The federal government focuses on appliances that significantly impact home energy consumption, such as HVAC systems and water heaters.

Some commercial-grade refrigeration units used in home settings may qualify under business-related energy efficiency incentives if used for rental properties or home-based businesses. ENERGY STAR-certified refrigerators can still provide savings through lower electricity costs, and some states offer sales tax exemptions or rebates. Homeowners should check with their state energy office or local utility provider for additional incentives.

Laundry and Kitchen Appliances

Washing machines, dryers, and dishwashers with ENERGY STAR certification reduce energy and water consumption but do not currently qualify for federal tax credits. Some states and utility companies offer rebates or discounts for purchasing high-efficiency models.

For example, California offers rebates for water-efficient washing machines, while some utility companies provide cash-back programs for energy-efficient dishwashers. Businesses that purchase commercial-grade laundry or kitchen appliances for rental properties may be able to claim depreciation deductions under Section 179 of the tax code, allowing immediate expensing of qualifying equipment.

Tax Forms and Filing Steps

Claiming tax benefits for energy-efficient appliances requires submitting the correct forms. The primary document used is Form 5695, Residential Energy Credits, which must be attached to Form 1040 or Form 1040-SR when filing a federal tax return.

Taxpayers must enter the total cost of eligible purchases on Part II of Form 5695. The Energy Efficient Home Improvement Credit has annual limits, so taxpayers must ensure they do not exceed the maximum allowable credit for each category. If multiple qualifying improvements were made in a single year, each expense must be listed separately.

Once the credit amount is calculated, it transfers to Schedule 3 (Form 1040), which consolidates nonrefundable credits. Errors in reporting can lead to processing delays or IRS rejections. Tax software can automate these calculations, but individuals filing manually should double-check their entries against IRS instructions.

State tax benefits may require additional filings. Some states offer their own energy efficiency credits or rebates, which may necessitate separate paperwork or online applications. Taxpayers should check their state’s Department of Revenue website for requirements.

Documentation Requirements

Accurate records are necessary when claiming energy-efficient appliance credits, as the IRS may request proof of eligibility. Taxpayers should keep purchase receipts that show the date of acquisition, cost, vendor details, and model and serial numbers.

Manufacturer certification statements, which verify that an appliance qualifies for a tax credit, should also be retained. These documents are typically available on manufacturer websites or included with the product. The IRS does not require these statements to be submitted with tax returns, but they should be kept for at least three years in case verification is needed.

Energy efficiency testing reports or third-party certifications can further substantiate a claim, particularly for appliances in newer efficiency classifications. If an appliance’s eligibility is unclear, documentation from the Department of Energy or the Environmental Protection Agency can provide additional assurance.

Considerations for Rental Properties

Property owners who rent out residential units generally cannot claim residential energy credits for rental properties. However, they may be able to deduct the cost of energy-efficient appliances through depreciation or other business-related deductions.

Under IRS Section 179, landlords can deduct the full cost of qualifying appliances, such as energy-efficient refrigerators or HVAC systems, in the year of purchase if they meet the IRS’s business property criteria. If the appliance does not qualify for immediate expensing, it must be depreciated over its useful life, typically five to seven years under MACRS (Modified Accelerated Cost Recovery System). Some state and local programs offer rebates or incentives for rental properties, which can offset costs even if federal tax credits are unavailable. Property owners should consult a tax professional to determine the best approach for claiming deductions.

Claiming Partial or Full Credits

Energy-efficient appliance credits are subject to limits, and not all purchases qualify for the full amount. The percentage of the credit depends on the type of appliance and whether it meets the highest efficiency standards set by federal agencies.

For example, under the Energy Efficient Home Improvement Credit, heat pumps and advanced HVAC systems may qualify for a larger credit than traditional furnaces or boilers. If multiple appliances are purchased in the same tax year, the total credit may be capped, requiring taxpayers to prioritize which expenses to claim. If a taxpayer’s total credit exceeds their tax liability, they may not be able to carry forward the unused portion unless explicitly allowed under IRS rules. Keeping track of annual limits and structuring purchases accordingly can help maximize tax savings.