In 2023, American consumers claimed $8.4 billion in tax credits under the Inflation Reduction Act (IRA) to enhance home energy efficiency, according to data released by the Internal Revenue Service (IRS). This amount significantly exceeded official projections.
More than 3.4 million U.S. households benefited from either the Residential Clean Energy Credit or the Energy Efficient Home Improvement Credit, as per IRS reports. These incentives are designed to reduce the costs associated with adopting energy-efficient technologies, such as rooftop solar panels and electric heat pumps, while simultaneously lowering greenhouse gas emissions and long-term utility expenses.
The average household received a $5,084 Residential Clean Energy Credit and an $882 Energy Efficient Home Improvement Credit, according to a U.S. Treasury Department analysis. California, Florida, New York, Pennsylvania, and Texas led the nation in claims. The data covered tax returns filed and processed through May 23, 2024.
While these tax breaks existed prior to the IRA, the 2022 legislation signed by President Joe Biden extended and increased their value for a decade. The popularity of these credits surpassed initial projections, with Deputy Treasury Secretary Wally Adeyemo noting a significant rise in claims during 2023, the first full year the benefits were in effect.
For fiscal year 2024, the Joint Committee on Taxation initially estimated the credits would cost $2.4 billion, about 25% of the actual claims reported by the IRS. The Treasury Department highlighted a 33% increase in the number of taxpayers claiming the credits and a nearly two-thirds increase in the total value of these credits compared to 2021.
The Residential Clean Energy Credit, covering up to 30% of installation costs for renewable energy systems, was claimed by 1.2 million households, totaling $6.3 billion. Meanwhile, the Energy Efficient Home Improvement Credit, also capped at 30% of project costs, was claimed by 2.3 million taxpayers, totaling $2.1 billion, with popular projects including insulation and window upgrades.
