Boosting Home Energy Efficiency Nets Tennesseans $64M in Tax Credits
Tennesseans are reaping tangible benefits from energy-efficient homes.
According to Tennessee Lookout, last year more than 45,000 Tennessee families saved a combined $63.9 million in federal tax credits for improving their homes’ energy efficiency or installing clean energy sources like solar power. Funding for the tax credits came from the 2022 Inflation Reduction Act. Nationally, more than 3.4 million households received a total $8.4 billion in tax credits, according to Internal Revenue Service data for 2023 tax returns filed and processed through May 23 of this year.
This is one part of a suite of federal Inflation Reduction Act initiatives aimed at helping American households save money on energy costs and slash their carbon emissions. Other programs, including a multi-billion-dollar home energy rebate program, have yet to roll out across most of the country.
These initiatives come as record-setting heat is driving up the cost of Americans’ power bills. In Tennessee and neighboring states, the estimated cost of cooling homes during summer months rose from $695 per household in 2023 to an estimated $774 this year, according to a June report from the National Energy Assistance Directors Association and the Center for Energy Poverty and Climate.
The tax credits came in two forms.
Nationally, taxpayers claimed upwards of $6 billion in residential clean energy credits for investments including solar electricity generation, solar water heating and battery storage. The Residential Clean Energy Credit is available for primary residents of a home that install new clean energy property from 2022 through 2032, including solar electric panels, wind turbines, solar water heaters, geothermal heat pumps and fuel cells or battery storage technology.
Taxpayers claimed another $2 billion for energy efficient home improvements, including insulation, windows and doors, heat pumps and efficient air conditioners. Taxpayers can qualify for home efficiency tax credits if they make certain improvements to their homes (primary residences only) between Jan. 1, 2023 and Jan. 1, 2033, according to the IRS.
About 9,700 Tennessee taxpayers netted nearly $30.3 million in clean energy credits — an average of $3,110 per family. Another $33.7 million in energy efficiency improvement credits were granted on 37,320 tax returns — an average of $902 per return.
But the tax credit system has also faced criticism for funneling benefits toward homeowners who can afford to purchase clean energy and efficiency upgrades for their homes.
