More Stringent Substantiation Rules May be Forthcoming with Regard to Claiming the Energy Efficient Home Improvement Credit

Effective beginning in 2023, taxpayers are allowed to claim a tax credit, capped at the amount of $3,200 annually, for home improvement expenses on their primary residence.  Prior to this revised tax credit and under the old tax rules, taxpayers were allowed only a lifetime tax credit for such home improvement costs capped at $500.  This revised tax credit for the years 2023 – 2032 covers costs for home improvements that include doors, windows, insulation, central air conditioning, water heaters, heat pumps and furnaces.  One proposed (not yet finalized by the IRS) update related to this revised tax credit places a stricter substantiation rule on taxpayers planning to claim this tax credit.  This proposal will require taxpayers to include a product identification number (PIN) with their tax return filing in order to qualify for this tax credit beginning January 1, 2025.  The PIN will be specifically assigned by qualified manufacturers to confirm that the item meets the rules of being “qualified energy property”.  Although this new requirement is currently scheduled for tax years after 2024, these proposed regulations on a qualified manufacturer PIN have not yet been finalized for the coming year.