Guest Blog by Daniel Barry

Replacing and improving your home’s insulation is a great way to reduce your utility expenses, and make your home more efficient, and comfortable. In an effort to incentivize energy efficient home improvements, Congress introduced new energy efficiency home improvement credits for home insulation as part of their Inflation Reduction Act. In addition to tax credits, the Act includes rebates under the department of energy.

Along with credits for roofing, doors and windows, insulation improvement costs can be written off on your taxes up to $1,200 per year from now until 2033. This is not cash in your hand, but a credit you can claim on your annual tax return that will reduce the federal taxes you need to pay as a homeowner. 

Calculating Tax Credit For Insulation

An individual taxpayer can claim a non-refundable tax credit for energy property costs up to 30% of the project or a maximum of $1,200. To calculate your energy efficiency home improvement credit, take the cost of the insulation material purchased for your attic restoration and enter it in the Residential Energy Tax Credit Form 5695. Please note that the service fees for the attic cleaning (labor) are not included in the tax credit and cannot be deducted. 

Keep receipts for your TAP Insulation contracts and/or applicable Manufacturer’s Certification Statements for this tax credit. Make sure you are using insulation with the ENERGY STAR® Seal to qualify for this tax credit under the 2009 IECC. This can also help you get local rebates in addition to federal tax credits.

Who Qualifies For Energy Tax Credits For Insulation?

The Residential Energy Credits up to $1,200 apply to individual taxpayers, not businesses. Keep in mind that the insulation must be “placed into service” during the taxable year. The good thing is that this credit can be applied every year until 2033 and there is no lifetime dollar limit. 

If a property is used solely as a business, the credit does not apply. If your home is used partly for business (up to 20%), you may take the full credit. If your home is used more that 20% for business (vacation rentals, investment properties), you may take a credit based on the share of expenses allocable to nonbusiness use.  For clarification, see this IRS FAQ article on energy property credits for businesses. 

How to Get an Insulation Tax Credit – Form 

Form 5695 – Residential Energy Credits

For the insulation tax credit to apply, you must use Form 5695 – Residential Energy Tax Credits and enter in the total amount spent on insulation materials. This entry can be found under line 19a on page 2. The IRS also has instructions for the form here. You can also add additional approved energy efficiency improvements on this form. 

The High-Efficiency Electric Home Rebate Act (HEEHRA) Rebate (in effect late 2023, early 2024)

In addition to the Inflation Reduction Act,the Department of Energy also created a new $4.245 billion program called the High-Efficiency Electric Home Rebate Act (HEEHRA). This act created energy efficiency rebates for households with a total annual income that’s less than 150% of the local median income. The program’s maximum rebates include an additional $1,600 for insulation. This program is still being phased in so expect more details over the next 12-24 months. 

Other Benefits for TAP Attic Insulation Beyond Tax Credits

In addition to the tax credits, upgrading your insulation to TAP will save hundreds in utility bills every year and will improve the resale value of your home. TAP® Pest Control Insulation is also ENERGY STAR® certified and features a revolutionary EPA-approved pesticide that utilizes borate-based cellulose that controls pests such as Ants, Booklice, Centipedes, Cockroaches, Crickets, Darkling Beetles, Earwigs, Millipedes, Silverfish, Sowbugs, and Termites (including Formosan Termites). Insulation also helps with resale value, more comfort (cool in the summer, warm in the winter) and dampens noise through sound absorption. Contact us today for more information about TAP insulation and tax credits. 

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