How Do Insulation Tax Credits Work?

How Do Insulation Tax Credits Work? blog header image

Upgrading the insulation and air sealing is a great way to make your Maryland home more comfortable, healthy, and affordable to heat and cool!

One of the best ways to get the most value for your investment is to take advantage of incentives that help lower the cost of new insulation, air sealing, and other energy efficient home improvements. A recent incentive that you may not have heard of is the 30% insulation tax credit. Here’s what you need to know about what this tax credit is and how it works.

What Is the 25C Insulation Tax Credit?

This federal tax credit for insulation, air sealing, and other energy efficiency upgrades is the result of changes made to the 25C Nonbusiness Energy Property Tax Credit, an existing tax credit that, honestly, hadn’t been worth enough for most homeowners to pay attention to.

But, the 2022 Inflation Reduction Act gave this tax credit a much-needed revamp, increasing the value of the credit and updating it. The newly renamed Energy Efficient Home Improvement Credit is now worth 30% of the cost of a variety of home upgrades, including insulation and air sealing work.

The tax credit has a $1,200 annual limit for insulation and air sealing, and it can be applied to everything except on-site labor costs. Total Home Performance can provide you with an itemized invoice so that you can accurately claim your credit.

All kinds of insulation work and materials qualify, including:

How Do Insulation Tax Credits Work?

The other thing that may be unfamiliar to you as a homeowner is how a tax credit works and how you claim it.

Tax credits aren’t like rebates where you receive a check in the mail. Instead, tax credits decrease the amount of taxes you owe. Because the insulation tax credit is a federal tax credit, it reduces what you owe when you file your federal taxes, not your state taxes. You simply fill out Form 5695, and deduct your credit to realize your savings. All you’ll need is a receipt from Total Home Performance that shows the total cost you paid for the insulation and air sealing materials used to upgrade your home.

*At Total Home Performance, we’re building science experts, not tax experts. The insulation tax credit is designed to be simple, but we have a professional look over our tax filings to make sure they are accurate, and you should too!

Bundle Your IRA Insulation Tax Credits with Local Insulation Rebates for Even More Savings

One of the best parts of the insulation tax credit is that you can still take advantage of other insulation incentives, including the Home Performance with ENERGY STAR rebate program offered by Delmarva Power and BGE utilities.

Total Home Performance is a qualified contractor through this program, which offers up to $7,500 off a number of different energy efficiency upgrades, including insulation, air sealing, and crawlspace encapsulation. We are one of the only contractors in our service area that can offer rebates on some of these services, and combined with the tax credit, you can see why it’s a no-brainer to upgrade your home with our team today!

Make your home more comfortable and energy efficient while saving money with insulation tax credits! Call (410) 822-1390 or contact us to get started.

Save up to $1,200 with insulation tax credits!

Call Total Home Performance to schedule your home upgrade.