Insulation and air sealing upgrades improve indoor comfort, lower heating and cooling bills, and create a healthier and safer indoor environment for your family. Plus, with the insulation tax credit, you can save 30% on the upfront costs of making these long-lasting home improvements, as much as $1,200 every year!
If you’ve never heard of a tax credit for insulation and air sealing, you’re in the right place. Not every contractor understands how to make tax credits simple for their customers, but we do! Keep reading to learn more about what exactly a tax credit is, what upgrades are available, and the different ways that the ARC Insulation team can help you benefit.
Tax Credits vs. Rebates for Insulation: What’s the Difference?
Tax credits and rebates are both incentives that help make energy efficiency home improvements more affordable, but they work in slightly different ways.
With a rebate, you receive a sum of money back after purchasing a qualifying product or service. This can be an immediate discount at the point of sale or a refund processed after submitting proof of purchase.
A tax credit, on the other hand, reduces the amount of income tax you owe. You see the savings when you file your taxes and claim your credit. As long as you owe enough in federal taxes, you can lower your net costs to upgrade.
Is the Insulation Tax Credit New? Why Haven’t I Heard About It Before?
Originally created over a decade ago, this tax credit, which is sometimes called the 25C tax credit because it’s section 25C of the IRS tax code, has undergone several revisions as new laws are passed. The most recent changes to this tax credit happened in 2022 as the result of the Inflation Reduction Act.
The 25C tax credit, which was officially renamed the Energy Efficient Home Improvement Credit, was updated and improved as part of the Inflation Reduction Act, allowing homeowners to realize significantly more savings on insulation, air sealing, and other energy efficiency upgrades.
What Home Improvements Are Tax Credit-Eligible?
The 25C tax credit doesn’t just apply to insulation and air sealing. There are a number of eligible services that qualify, including up to $150 for energy audits. Others include:
- Windows and doors
- Furnaces, air conditioners, and boilers
- Water heaters
- Electrical panel upgrades
Best of all, heat pumps and heat pump water heaters have a dedicated $2,000 limit under the 25C tax credit, separate from the combined $1,200 annual maximum covering all of the improvements listed above. This means that you could claim as much as $3,200 in a single year if you upgraded your insulation and installed a heat pump.
Work With an Insulation Contractor That Understands Tax Credits
The insulation tax credit is easy to qualify for and claim—as long as you work with a contractor that understands the rules and is committed to making the process simple for customers! At ARC Insulation, we can provide you with an itemized invoice that clearly identifies your tax credit-eligible expenses and has everything you need when it comes time to file*. Our team is well-trained on tax credits, can answer any questions you have, and will make sure you get ALL of the credit you qualify for!
*We always recommend hiring a tax professional when it comes to your taxes, especially when there are significant incentives on the line!
