An IRS Notice provides a transition rule that generally allows taxpayers to claim the Code Sec. 25C energy efficient home improvement credit for home energy audits conducted in 2023 even if the auditor is not certified. The Notice also describes regulations the IRS intends to propose for qualified home energy audits.
Taxpayers may rely on the Notice until the proposed regs are issued. The proposed regs are expected to apply to tax years ending after December 31, 2022 .
Energy Efficient Home Improvement Credit for Home Energy Audits
The energy efficient home improvement credit is generally equal to 30 percent of amounts paid or incurred for qualified energy efficiency improvements, residential energy property expenditures, and home energy audits placed in service after 2022. The credit is generally limited to $1,200 per year, but different annual limits apply to particular types of expenses.
The annual credit for home energy audits is limited to $150 per year. For example, if a taxpayer pays $900 for a home energy audit, the credit is limited to $150 rather than 30 percent of the expense ($300).
A qualified home energy audit must:
| (1) |
be for a dwelling unit in the United States that the taxpayer owns or uses as a principal residence; |
| (2) |
be prepared by a home energy auditor that meets certification or other requirements specified by the IRS; and |
| (3) |
include a written report that identifies the most significant and cost-effective energy efficiency improvements with respect to the home, and estimates the energy and cost savings with respect to each of those improvements. |
Transition Rule for 2023
A transition rule applies to home energy audits conducted on or before December 31, 2023, during a tax year ending after December 31, 2022. An audit during this transition period may qualify for the credit even if it is not conducted by a certified home energy auditor. However, an audit conducted after December 31, 2023, will not qualify for the credit unless the auditor is certified.
Proposed Regs: Certified Home Energy Auditor
The proposed regs will define a “qualified home energy audit” as an inspection conducted by or under the supervision of a qualified home energy auditor. The audit must be consistent with the Jobs Task Analysis led by the Department of Energy (DOE) and validated by the industry.
A qualified home energy auditor will have to be certified by a Qualified Certification Program at the time of the audit. DOE maintains a list of qualified certified programs on its website at https://www.energy.gov/eere/buildings/25c-energy-efficient-home-improvement-credit. These are the only programs that may certify a qualified home energy auditor.
Proposed Regs: Written Report
Under the proposed regs, a qualified home energy audit must include a written report prepared and signed by the qualified home energy auditor. The report must include:
| (1) |
the auditor’s name and employer identification number (EIN) or other relevant taxpayer identifying number; |
| (2) |
an attestation that the auditor is certified by a qualified certification program; and |
| (3) |
the name of the certification program. |
Proposed Regs: Substantiation
Finally, the proposed regs will require the taxpayer to substantiate the home energy audit expenditure by maintaining the certified home energy auditor’s signed written report as a tax record. The taxpayer must also comply with the instructions for Form 5695, Residential Energy Credits, or any successor form.
