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Living With Climate Change: There’s now a $500 tax credit for heat pumps, EV chargers and these home improvements — EPA expands Energy Star program

Add electric-vehicle chargers, heat pumps, smart thermostats and more to the list of energy-efficiency home improvements that can earn homeowners a tax credit.

The U.S. Environmental Protection Agency said Tuesday its Energy Star program, which already targeted water heaters, lower-impact appliances and other upgrades, now includes additional “green-minded” home improvements. Such upgrades are intended to save the average family about $500 a year on utility bills in addition to the IRS perk.

In recent tax years, including for 2021 returns currently being filed, an individual may claim a credit for (1) 10% of the cost of qualified energy efficiency improvements and (2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during the taxable year, subject to the overall credit limit of $500. In its current form, this is a one-time credit.

Learn more about the newly named Energy Star Home Upgrade program at and which tax years qualify. And here’s the form you’ll need to apply for the tax credit: IRS Form 5695: Residential Energy Credits

Read: The IRS will stop sending out one type of taxpayer notice to try to cut down on aggravation this tax season

And more: Tax Watch

Like its earlier versions, the program works with manufacturers and retailers for official Energy Star labeling.

Six new home improvements that qualify:

  • An ENERGY STAR certified air source heat pump for clean and efficient heating and cooling;

  • An ENERGY STAR certified heat pump water heater for super-efficient hot water;

  • An ENERGY STAR certified smart thermostat with smart climate controls;

  • High-performing ENERGY STAR certified windows and storm windows;

  • A well-insulated and sealed attic;

  • An electric vehicle charger for home.

The action is part of an ambitious promise by the Biden administration to steer the country toward net-zero carbon and methane emissions by 2050, the pollution that’s been responsible for sending Earth’s temperatures higher. And even sooner, the president and others want to cut emissions by at least half by the end of this decade, a pledge in keeping with those from the world’s most powerful economies, and largely reliant on businesses and households to follow suit. So far, government agencies have taken steps to slow climate change in lieu of broad passage of an environmental agenda on Capitol Hill.

Read: Solar tax credits and heat pump rebates: All the ways Build Back Better could incentivize cleaner energy at home

“Every American can make a difference in protecting our climate with the choices they make at home — and they can save money while they are at it,” EPA Administrator Michael Regan said in a release.

“If every household took the actions outlined in the Energy Star Home Upgrade [program], the U.S. could cut its residential annual energy use up to 20% by 2050,” he said.

The EPA says that since the 1992 launch of its voluntary Energy Star labeling, education and tax-incentive program, U.S. families and businesses have saved 5 trillion kilowatt-hours of electricity, avoided more than $450 billion in energy costs and achieved 4 billion metric tons of greenhouse gas reduction.

Electric, or air source, heat pumps and electric cooktops and ovens — powered by an electricity grid that itself will need a greater overhaul favoring renewable energy sources — feature in a major push by some lawmakers, local officials and energy and environmental groups. Some in the U.S. are rethinking the longer-run impact of using historically cost-effective and abundant natural gas
which largely runs the electricity grid, along with coal, solar and wind. Some home heating and cooking is directly powered by natural gas, and in some regions, heating oil warms homes.

Related: The bitter breakup with gas stoves is getting closer — here’s another reason why

Last month, New York City created a law that prohibits the combustion of fossil fuels, namely gas, for cooking and heating in select new buildings. Berkeley, Calif., became the first city in the U.S. to ban gas hookups in new construction in 2019. And now at least 42 cities in California, including San Francisco and San Jose, have acted to limit gas in new buildings. Salt Lake City and Denver have also made plans to move toward electrification.

Read: Here’s the first U.S. city to swap gas and oil for all-electric buildings, on the path to zero carbon emissions

The gas industry would rather target its climate impact by creating renewable natural gas and working to curb methane emissions, while some lawmakers worry that the U.S. will give up too much authority to outside political powers if America steps away from its own gas production.

Read: Biden’s climate envoy Kerry says natural gas could be a ‘bridge fuel,’ but emissions capture is key

Extension of these home-energy tax credits beyond their 2023 expiration remains up in the air. They and other incentives that select lawmakers look to pass in support of renewable energy, EV adoption and more are currently held up in a stalled Build Back Better spending bill. Biden has said he will push for climate-change and energy-efficiency efforts to be advanced separate of the current, $4 trillion version of that bill.

Read: A ‘Made in America’ EV tax credit — what car buyers need to know if Biden can advance a sliced-and-diced Build Back Better bill