The Non-Business Energy Property Tax Credits expired on December 31, 2021 and congress has not yet approved an extension. Despite this, if you upgraded your water heater, you may qualify for a $300 tax credit. That is $300 back on your tax returns that lowers your tax liability. (non-refundable)

What is the Tax Credit?

Tax Credit: $300 (Maximum of $500 for all energy efficiency improvements claimed under this credit)
Purchase by: December 31, 2021
Claim by: April 15, 2022
Details: Equipment must be installed in an existing home & your principal residence. New construction and rentals do not apply.

What are the Requirements?

Electric Heat Pump Water Heaters

In order to receive a tax credit of $300, the electric heat pump (hybrid) water heater must meet the following criteria:

Uniform Energy Factor (UEF) >= 2.2

Gas, Oil or Propane Water Heaters

The following criteria must be met in order to receive a tax credit of $300:

Uniform Energy Factor (UEF) >= 0.82 OR a thermal efficiency of at least 90%.

What’s the Catch?

The federal tax credit only applies to equipment installed in existing homes, not new construction. The home must also be your primary residence – no secondary residences or rentals. You can only claim up to a total maximum credit of $500 for all of the years (2005-2021) combined. If you’ve already claimed $500 from the Nonbusiness Energy Property Tax Credit since 2005, you won’t be eligible to claim any more credits.

How Do I Apply?

We will File IRS Form 5695 with your tax return.

Author: Orkun Ozkaymak, CPA, MBA
Orkun Ozkaymak, CPA, MBA