Tax Saving Opportunities for Energy Efficiency Improvements

Alaskans who are considering improvements to increase their home’s energy efficiency may have new financial incentives to do so.

Recent changes to tax laws will allow homeowners to receive more tax credits for qualified energy efficiency improvements. Ultimately, this can help reduce homeowners’ tax bills each year.

There are two tax credit changes that can benefit homeowners (and in some cases, renters may also be able to take advantage): the Energy Efficient Home Improvement Credit and the Residential Clean Energy Property Credit.

“Alaskans who are looking to improve efficiency in their homes have an opportunity to save money through reduced energy usage and by taking advantage of these new tax credits,” said Ethan Stoops, Program Information Manager for AHFC’s Research and Rural Development Department. “That includes credits for items that can be of particular benefit to Alaska residents such as heat pumps, rooftop solar panels, and exterior envelope improvements like new energy-efficient doors and windows.”

Energy Efficient Home Improvement Credit

The Energy Efficient Home Improvement Credit is equal to 30% of the total amount a homeowner spends on qualified energy efficiency improvements, residential energy property expenditures and home energy audits during the year.

There are specific home improvement activities that are eligible, and each has an allowable amount of tax credit available. Read a breakdown of what options are available by the type of energy efficiency equipment or upgrades that qualify. 

Annual Credit Now Available

Previously, homeowners were only allowed a $500 lifetime credit for energy efficient home improvement but now can receive an annual credit of $3,200 to include:

$2,000 per year for heat pumps 
$1,200 per year for other upgrades that include insulation, doors and windows, electrical panels and an energy audit.

Residential Clean Energy Property Credit

The second new option is the Residential Clean Energy Property Credit, which provides a 30% tax credit for the purchase and installation of rooftop solar, geothermal heating and battery storage. Improvements that were performed in 2022 are eligible for tax credits, except those for battery storage.

You can learn more about the new tax credit opportunities with these FAQs.

Before You Begin

It is important that you speak with a tax professional to determine what credits you may qualify for before you get started. Also, the Energy Efficient Home Improvement Credit has efficiency requirements to receive credits, which means you should make sure any heat pumps, doors or windows you may be installing meet those requirements.