Home Energy Audit Tax Credit: How to Qualify and Claim It
Learn how to qualify for and claim the home energy audit tax credit, including eligibility, required documentation, and how it fits with other incentives.
Reducing home energy costs is a priority for many homeowners, and efficiency upgrades can lead to significant savings. To encourage these improvements, the federal government offers tax credits, including one for home energy audits. This credit helps offset the cost of a professional assessment that identifies ways to improve energy efficiency.
Eligibility Requirements
The home energy audit tax credit applies only to assessments conducted on a primary residence in the United States. Rental properties, second homes, and newly built homes do not qualify.
A certified home energy auditor must perform the assessment, meeting standards set by the Department of Energy or another recognized authority. Homeowners should verify the auditor’s credentials before scheduling an inspection, as using an uncertified professional could result in a denied credit.
The audit must be completed within the tax year for which the credit is claimed. If conducted in December, it must still be reported on that year’s tax return. Keeping track of the audit date helps prevent filing issues.
Qualifying Assessment Items
A home energy audit evaluates insulation, heating and cooling systems, windows, doors, and air sealing to identify efficiency improvements. The final report should provide specific recommendations and quantify potential energy savings.
Diagnostic testing is essential. Blower door tests measure air leaks, and infrared cameras detect insulation gaps. These tools help auditors pinpoint inefficiencies that may not be visible during a basic inspection.
The report must include an energy efficiency score or rating based on industry standards, such as the Department of Energy’s Home Energy Score (HES). A valid audit highlights problem areas and potential savings from recommended improvements.
Credit Calculation
The tax credit covers 30% of the audit cost, up to a maximum of $150 per tax year. For example, if an audit costs $500, the homeowner receives the full $150 credit. If the audit costs $300, the credit is $90. Any amount beyond the $150 cap is not eligible.
Unlike deductions, which reduce taxable income, this credit directly offsets tax liability. If a homeowner owes $2,000 in federal income tax and qualifies for the full $150 credit, their tax bill is reduced to $1,850. However, this is a nonrefundable credit, meaning it can only reduce taxes owed to zero and does not generate a refund if the credit exceeds the total tax liability.
Required Documentation
To claim the credit, homeowners must keep records proving the audit was completed and showing the associated costs. The most important document is the auditor’s final report, which outlines findings, recommendations, and an energy rating or score. Without this report, the IRS may disallow the credit.
A copy of the itemized invoice or receipt from the certified home energy auditor is also necessary. The receipt must clearly state the audit cost as a separate line item. Bundled services that include additional consulting or upgrade installations may not qualify in full. The receipt should include the auditor’s name, business details, and certification credentials. Payments should be made using traceable methods such as credit cards, checks, or electronic transfers, as cash payments without proper documentation could raise compliance issues.
Claiming on Your Return
Once all necessary documentation is gathered, homeowners can claim the credit when filing their federal income tax return. The credit is reported on IRS Form 5695, which is used for residential energy credits. Taxpayers must enter the audit cost and calculate the eligible credit amount based on the 30% reimbursement rate, ensuring it does not exceed the $150 limit. The final credit amount is then transferred to Schedule 3 of Form 1040 to reduce total tax liability.
Taxpayers should retain all supporting documents, including the audit report and receipt, for at least three years in case of an IRS review. If filing electronically, most tax software programs guide users through the process. Those who work with a tax professional should provide all relevant paperwork to ensure the credit is applied correctly. Since this credit is nonrefundable, taxpayers should confirm they have sufficient tax liability to benefit from it fully.
Combining With Other Incentives
The home energy audit credit can be used alongside other federal and state energy efficiency programs. Homeowners who proceed with recommended upgrades may qualify for additional credits, such as the Energy Efficient Home Improvement Credit, which covers a percentage of costs for insulation, heat pumps, and high-efficiency windows.
State and local governments, as well as utility companies, often offer rebates and incentives for energy-saving improvements. Some programs provide direct discounts on qualifying upgrades, while others offer performance-based incentives tied to energy reductions. Homeowners should check the Database of State Incentives for Renewables & Efficiency (DSIRE) to identify available programs in their area. Combining these benefits with the federal tax credit can lead to substantial overall savings.