I see it's the top of the hour. For those of you just joining, welcome to today's webinar, Energy Efficient Home Improvement Credit & Residential Clean Energy Property Credit: How the Inflation Reduction Act revised these credits. We're glad you're joining us today. My name is Roy Cheney and I'm a Senior Stakeholder Liaison with the Internal Revenue Service, and I will be your moderator for today's webinar, which is slated for approximately 75 minutes. This webinar offers one IRS continuing education credit. Participants earn one IRS CE credit and related certificate completion by attending the live broadcast of the webinar for at least 50 minutes after the official start time and answering at least 4 of the polling questions during the live broadcast. Please note that the polling questions example to test your pop up blocker does not count towards the polling question response requirement. 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We have documents for Chrome, Firefox, Microsoft Edge and Safari, which is for the Macs, and you can access them by clicking on the Materials drop down arrow on the left screen. We're going to take some time and test the polling feature, so here's your opportunity to ensure your pop up blocker is not on so you can receive the polling questions throughout today's presentation. Audience, please remember that this is an example polling question, does not count towards the polling questions requirements to earn your CE credit. Now, do you know who your stakeholder liaison is? Is that A, Yes; B, no; or C, what is a stakeholder liaison? Take a moment and click the radio button that corresponds to your answer. So let me reread the question. Do you know who your local stakeholder liaison is? Is it A, Yes; B, no; or C, what is a stakeholder liaison? I'll give you a few more seconds to make your selection. Okay, we're going to stop the polling now, so let's see how the majority of you responded. I see that most of you responded with 60% of your choice, so we hope that you received a polling question and was able to submit your answer. But if not, now is the time to check your pop up blocker to make sure that you have it turned off. Again, we've included several technical documents that describe how you can disable pop up blockers based on the browser you are using. Just click on the Materials dropdown arrow on the left side of your screen to download your browser document. Again, welcome. We're glad you joined us for today's webinar. Before we move along with our session, let me make sure you're in the right place. Today's webinar is Energy Efficient Home Improvement Credit & Residential Clean Energy Property Credit: How the Inflation Reduction Act revised these credits. This webinar is scheduled for approximately 75 minutes from the top of the hour. But now today we are joined by our speaker. His name is Richard Furlong. Richard is a Senior Stakeholder Liaison in the Mid Atlantic Area Stakeholder Liaison Office of the Internal Revenue Service Communications and Liaison Division. Stakeholder Liaison serves as the primary IRS liaison office to tax practitioner organizations throughout the country. He has spoken on behalf of IRS and nationwide tax forms, tax talk today webcasts, stakeholder liaison web conferences, as well as many practitioner and industry virtual and face-to-face events where he discusses IRS programs, policies and procedures. Rich is a graduate of the University of Pennsylvania, Wharton School with a Bachelor of Science degree in Economics. So without further ado, Richard, please take it away. Well, thank you Roy, and good day everyone. Welcome to today's webinar on the topic of Energy Efficient Home Improvement Credit & Residential Clean Energy Property Credit: How the Inflation Reduction Act revised these credits. So to get underway, let me share our agenda for today on the next slide. So for today's webinar agenda, we're going to cover an overview of the following. We're going to look at the IRA, that's the Inflation Reduction Act revisions to the Energy Efficient Home Improvement Credit under Internal Revenue Code 25C. We'll then look at the IRA revisions to the Residential Clean Energy Credit under IRC 25D. We'll talk about the qualified costs allowed and taken on Form 5695 for each of these two credits. And we'll also discuss the impact of government subsidies in calculating the two credits. Quite a lot to cover. So moving on to the next slide, as you may recall, the Inflation Reduction Act was enacted on August 16th of 2022 and among other provisions, it amended the credits for energy efficient home improvements under 25C of the internal Revenue Code and also amended the Residential Clean Energy Property Credits under 25D of the code. Now, the Inflation Reduction Act empowers and equips homeowners who want to make upgrades so that they can save energy and also reduce their energy costs. Families can save money on their monthly energy bills by choosing energy efficient equipment or property that uses less electricity each month. The homeowners can also fix inefficiencies like drafty windows and poor insulation that lead to energy waste. Now these new and revised tax credits in the Inflation Reduction Act can reduce the cost of energy efficient home upgrades and that would include heat pumps and other appliances, windows, doors and more. These improvements would also offset the cost of added residential clean energy sources and that would include items such as solar panels and battery storage. Both of these credits are claimed on the form -- by filing Form 5695 with your income tax return each year now. So what's new about the energy credits? Well, previously there was a non-business energy property credit in the Internal Revenue Code and that is now renamed following the IRA as the Energy Efficient Home Improvement Credit, as you see on the slide. The IRA act extends through calendar year 2032 the tax credit for non-business, in other words residential energy property expenditures. It also increases the amount of the credit to 30% of the expenditures and allows up to an annual $1,200 credit in lieu of the previous lifetime limitation and it also increases the credit for windows and doors that meet certain requirements. Now the Energy Efficient Home Improvement Credit also allows a separate annual credit for electric and natural gas heat pump water heaters, also electric and natural gas heat pumps, and also biomass stoves and biomass boilers. So the amount of the credit for these properties that I just described is 30% of the qualified expenses up to an annual credit limit of $2,000. So thus the total Energy Efficient Home Improvement Credit, again under 25C that may be taken, is an annual limit of $3200 and that would be broken out into $1200 for energy efficiency improvements and up to $2000 for the heat pump, water heaters, heat pumps and biomass stoves and boilers. And this credit is taken on Form 5695, Part 2 of the form. Now, the residential what was referred to previously -- prior to IRA as the Residential Energy Efficient Property Credit is now renamed, as you see on the slide, the Residential Clean Energy Credit -- the Residential Clean Energy Credit, excuse me. The credit rate for property or equipment that was placed in service in 2022 through 2032 is 30%. And interestingly, there is no annual limit for this credit other than that the credit is limited to the amount of the tax liability shown on the tax return and the Residential Clean Energy Credit is taken on Form 5695, Part 1. So you can claim both the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit in the same year. So for example, if you improve your home energy efficiency with improvements such as new energy saving windows, doors, heating and cooling systems, you may qualify for an annual tax credit of up to $3,200 through the Energy Efficient Home Improvement Credit. You may also claim a credit of up to, again, 30% of the qualifying costs with some limitations on clean energy property that's installed in the year under that 25D Residential Clean Energy Credit. One thing to keep in mind though, that both the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit are non-refundable credits and they're personal credits that are nonrefundable. A taxpayer claiming a nonrefundable tax credit can only use it to decrease or eliminate their tax liability. A taxpayer will not receive a tax refund of any amount that exceeds the taxpayer's liability for the year. So let's start with a review on the next slide of 25C, the Energy Efficient Home Improvement Credit, as you see there. Now, this credit again provides a tax credit for energy efficiency improvements to residential homes. Homeowners who improve their primary residence will find the most opportunities to claim a credit for qualifying expenses. However, renters may also be able to claim these credits as well as owners of second homes that they use as residences. So there are some differences which we'll come back to later for some of the credits between primary and secondary residences. The credit is not available for improvements made to home that you don't use as a residence. So if you're a landlord, you cannot take these credits on the property you own. Again, the Energy Efficient Home Improvement Credit is limited to $3,200 annually. And it's a lower -- and it's intended obviously to lower the energy efficient upgrades that you're spending money on. And again, that would include heat pumps, insulation, efficient doors and windows, electric panel upgrades, and as we'll see, energy audits. So, heat pumps alone can save households up to $500 in energy costs each year. Now, moving on to the next slide, as we mentioned earlier previously, this credit 25C was known as the non-Business Energy Credit, and it was much more limited. It was limited to a $500 lifetime credit, not very much. So the important point here is amended by the Inflation Reduction Act, that the credit is increased through 2032 with an annual credit of up to $1,200. So beginning in January 1st of 2023, the amount of the credit is equal to the smaller of $1,200 or 30% of the sum of amounts paid by the taxpayer for certain qualified expenditures. And again, they would include basically three categories; qualified energy efficient improvements that are installed during the year, qualified residential energy property expenditures during the year, and finally, home energy audits performed during the year; and we'll come back to that later. Now on the next slide -- there we go. There are limits on the allowable annual credit and then the amount of the credit for certain types of expenditures. And the credit again is allowed for expenditures through 2033. So you see, it's much different than the old lifetime credit. So just to summarize before we get to our first polling question on the next slide, the Inflation Reduction Act extends through 2032 but a number of years away the tax credit for non-business, in other words, residential energy property expenditures and increases the rate of the credit to 30% and it allows $1,200 limitation of the credit amount in lieu of a lifetime limitation, big improvement, and increases the credit for windows and doors, as we'll see later. And then again, there's an annual $2,000 credit for electric and natural gas heat pump, water heaters, electric and natural gas heat pumps, and biomass stoves and boilers. So we've thrown quite a bit at our audience to get underway. Roy, let's go on to the first polling question. Thank you, Rich. We're going to go ahead and move to the first polling question, but we are getting some information that if you could just raise the volume up a little bit, people seem to believe they're unable to hear you a little bit, so just raise the volume up. So now, audience, let's get to our first polling question and take a moment and click the radio button that best answers the question. So here's the question. The Energy Efficient Home Improvement Credit is A, a refundable credit of up to 500; B, a non-refundable credit of up to 500; C, refundable credit of 30% of qualified expenditures capped at 3200; or D, non-refundable credit of 30% of Qualified Expenditures capped at 3200. Again, take a moment, click the radio button that best answers the question. If you do not receive the polling question, please enter only the letter A or B that corresponds with your response in the Ask Question text box. Your response is then time stamped. And audience, please remember that you need to answer at least three polling questions and participate in the live broadcast from the official start for at least 50 minutes to earn one IRS CE credit. The polling question example we did at the beginning of this presentation does not count towards the requirement. I'll give you a few more seconds to make your selection and submit your answer in the Ask Question feature. All right. Okay, we're going to stop the polling now and let's share the correct answer on the next slide. And the correct answer is D non-refundable credit of 30% of qualified expenditures capped at 3200. And I see that 79% of you responded correctly. So I Rich, I believe we need a little clarification. I'd be happy to, Roy. And Roy, am I coming through loud and clear now? Now you're sounding perfect, Rich. Thank you, Roy. So let's remember that under the old law, IRA 2022, it was a lifetime credit non-refundable of up to $500. But the big change with the Inflation Reduction Act is that while it's kept it at a nonrefundable credit, the credit now is 30% of qualified expenditures annually up to $3,200. So a big change, but it remains a nonrefundable credit, Roy. So with that, let's go on, let's continue with the discussion and we'll get into some more details on this credit. And again, we're sticking right now with the Energy Efficient Home Improvement Credit. So this slide and the one I'll get to next show the category of expenses shown on Form 5695 that may qualify if they meet the requirements and those requirements are detailed on the Department of Energy website, which is energy.gov. So to break down the expenses and look what qualify for the Energy Efficient Home Improvement Credit, remember again, it's the smaller of $1,200 or 30% of the sum of the amounts paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the year and, added to that, the amount of the residential energy property expenditures incurred during the year. And you see them broken out into those two sections on this slide. So in general, the term qualified energy efficiency improvements means any energy efficient building envelope component, if that component is installed in or on a dwelling unit, has to be located in the United States and used by the taxpayer as their principal residence in the United States. The original use of the component starts with the taxpayer, so it's not used property for which you're taking the credit. And the component as part of the building envelope has to reasonably be expected to remain in use for at least five years. So on this slide, you're going to see some examples, I hope, of the building envelope components. And you see exterior doors, exterior windows and skylights, insulation and air ceiling material. Now, qualified energy property, which is also part of the Energy Efficient Home Improvement Credit, include items such as central air conditioners, natural gas, propane or oil, water heaters, furnaces and hot water boilers. And you also see there at the bottom bullet that the cost of electrical components that are needed to support residential energy property and these would be new installations of, let's say, panel boards, sub-panel boards, branch circuits, feeders, items that you would employ an electrician to install, they can also qualify for the credit if these installations meet the National Electric Code and have a capacity of at least 200 amps or more. And there's a limitation of $600 per item for the panel boards. Now moving -- still sticking with the Energy Efficient Home Improvement Credit, a home energy audit for the first time could qualify for a credit of up to $150. The home energy audit must include an inspection of the dwelling and that would include a condominium that you use as a residence and certain manufactured homes. Again, they have to be located in the United States and the residence has to be owned and used by the taxpayer as the taxpayer's principal residence to get the home energy audit portion of the credit. Now, the auditor themselves, the home energy auditor must provide a written report at the conclusion of the audit to the taxpayer that identifies the most significant and cost effective energy efficient improvements for that dwelling. And that would include -- that written report would include an estimate of the energy cost savings for each of the improvements. And also the auditor must meet the certification or any other requirements that will be specified by the Department of the Treasury and the Internal Revenue Service in guidance that we will be issuing forthcoming. Residential energy property expenditures, the definition of that term in the code, means expenditures for which made by the taxpayer for qualifying property, which again is installed in the dwelling unit located in the US and used as a residence by the taxpayer, and it has to be originally placed in service by that same taxpayer. Now moving on to the next slide, we're going to see a nifty chart which helps to clarify these categories of the expenditures for the Energy Efficient Home Improvement Credit. So you see the four boxes here containing the categories of expenses and these are all taken on Form 5695 Part 2 that may qualify for this credit. So you see the building envelope components on the left hand side there, and that would include those doors, exterior doors, exterior windows and skylights, insulation and ceiling materials. And then on the upper right hand side, the box has the central air conditioners, the natural gas, propane or oil, water heaters, furnaces, hot water boilers, and those electrical panel boards and feeders. And then in the lower left hand corner you have the qualified energy property, and those are the electric or natural gas heat pumps, the electric or natural gas heat pump water heaters, biomass stoves and boilers. And then finally in the lower right hand side are the home energy audits. So these are all components of the Energy Efficient Home Improvement Credit. So with that, Roy, let's take a pause and tee up our second polling question for our audience today. Thank you, Richard. That sounds like a great idea. And with that said, audience, here's our second polling question. Eligible improvements and expenditures for the credit do not include A, building envelope components; B, monthly bills for electricity consumption; C, home energy audits; or D, qualified energy property. Audience, take a moment, click the radio button that best answers the question. If you do not receive the polling question, again, please enter the letters A or B that corresponds with your response in the Ask Question text box. Your response is then time stamped. So I'll give you a few more seconds to make your selection and submit your answer in the Ask Question feature. All right, we're going to go ahead and stop the polling now and let's share the correct answer on the next slide. And the correct response is B, monthly bills for electricity and consumption. And I see that 95% of you responded correctly. That's a great response. We're doing very well, Rich, back to you. Thank you, Roy. It's also an indication I haven't yet put you to sleep with this technical material. Now again, the Energy Efficient Home Improvement Credit 25C provides a maximum credit of $3200 annually with the goal of lowering those -- to lower the cost of the energy efficient upgrades by virtue of the federal tax credit by up to 30%. And again, that would include the heat pumps, the insulation, those efficient doors and windows, electrical panel upgrades, and the energy audits. And as I think I mentioned earlier, heat pumps alone can save up households up to $500 in energy costs every year. Now, taxpayers can only claim the credit for qualifying expenditures incurred for an existing home or for an addition to a renovation of an existing home. But this credit, and this is important, is not available for a newly constructed home. And again, the key takeaway here is that the Energy Efficient Home Improvement Credit has two parts. This slide shows the expenditures that are referred to as the qualified energy efficiency improvements, and they can result in a maximum of $1,200. So these items here. Now moving on to the next slide for the $2,000 maximum credit, that would include the heat pumps, the biomass stoves or biomass boilers, a percentage of those costs. So again, the overall potential credit annually for a taxpayer for the Energy Efficient Home Improvement Credit is $3,200. Now let's look on the next slide on limitations for various types of upgrades that qualify for this Energy Efficient Home Improvement Credit because there are some limitations here. Now I like this slide that you're looking at now because it brings together in one slide shows how we can come up to that maximum potential credit of $3,200. And you see there in the box the expenditures that can be used to calculate a maximum credit of $1,200 and then the other installations in the bottom box on the right that can qualify for the $2,000 component of the credit. So next we'll look at the limitations for various types of upgrades that qualify for this credit. Now the following energy efficient home improvements are eligible for again the Energy Efficient Home Improvement Credit, but they have respective limitations as you can now see on the slide. So building envelope components, when you hear that term, building envelope components, those are the exterior windows, the skylights, insulation, exterior doors that satisfy Department of Energy’s ENERGY STAR efficiency requirements. The exterior windows and skylights 30% of the cost, but capped to a maximum of $600 for all windows; exterior doors, 30% of the cost up to $250 per door, so that would be a total of $500 for the exterior doors in any one year; and then the insulation materials or systems and air sealing materials, that's 30% of the cost up to so collectively that's where you would come up to $1200. I do recommend highly the Department of Energy's ENERGY STAR website for more detailed information on the requirements for the windows, skylights and doors. And we'll have more information on the resources. Now this slide shows the types of residential energy property that would have 30% of the cost, which here would include labor up to $600 for each item, excuse me, that satisfy the energy efficiency requirements. So as you can see here, we're looking at natural gas, propane or oil, water heaters; natural gas, propane or oil furnaces and hot water boilers; and then on the next slide we're looking at those panel boards, sub panel boards, branch circuits, feeders, again installed according to code, National Electric code, and they have to have a load capacity of at least 200 amps or greater for energy efficiency. One of the key takeaways today is that at Irs.gov, we have a full set of frequently asked questions on the Energy Efficient Home Improvement Credit and the types of these improvements that may qualify. I also recommend viewing the -- when posted to Irs.gov the 2024 instructions for the Form 5695 and I'll come back to that later. Now on the next slide, let's look specifically at the -- once again at the home energy audit provision of the Energy Efficient Home Improvement Credit. Now this is a narrower credit. This slide shows some of the requirements for a home energy audit to qualify for up to $150 as part of the overall Energy Efficient Home Improvement Credit. And again, the audit must include an inspection of the dwelling, again would include a condominium or certain manufactured homes, they have to be in the US and owned and used by the taxpayer as their personal residence. The home energy auditor must provide a written report to the taxpayer that identifies the most significant and cost effective energy efficiency improvements for that dwelling and includes an estimate of the energy costs and savings for each improvement. And then finally, as I mentioned earlier, we will have upcoming guidance from the Treasury Department and the IRS on the requirements for the auditor, him or herself, who have to be certified to issue that report, that 30% of the cost of that report could contribute to a $150 credit. Now on this next slide, we come back to the heat pumps and biomass stoves. And again, I know this is a bit technical, but this is all addressed in the instructions and in the FAQs. Heat pumps that meet or exceed the Consortium of Energy Efficiency, that's that CEE acronym you see there, Consortium of Energy Efficiency for the highest efficiency tier in effect at the beginning of the year in which the property is installed, and then biomass stoves and boilers with a thermal efficiency rating of at least 75% qualify for a credit of up to $2,000 per year. The labor costs can be included in the calculation of the credit. So just to wrap up this slide, we're talking again about qualified property that would be electric or natural gas heat pumps, electric or natural gas heat pumps and boilers, and biomass stoves and boilers, and that could be up to $2,000 per year. So this next slide here is a recap of everything we've been going through with the Energy Efficient Home Improvement Credit, which is quite a bit. The exterior doors and windows and skylights, they must meet the Department of Energy’s ENERGY STAR requirements on their website. The insulation material or systems and the air sealing materials, as part of the building envelope, they have to meet technical requirements specified by the International Energy Conservation Code or IECC. The heat pumps, the water heaters, the central air conditioners, the furnaces, hot water boilers, they often meet the requirements of that public private partnership known as the Consortium for Energy Efficiency. Oil furnaces or hot water boilers, in 2021, ENERGY STAR efficiency criteria used with fuel blend of at least 20% of eligible fuel, but that's been revised with IRA. And then the panel boards and branch circuits, they have to meet the National Electric Code and, remember, they have to have a load capacity of 200 amps or greater. So by installation, they would improve the energy efficiency in the home. Now, one key point before we go to our third polling question, and this is very important for the 2024 tax year or possibly 2023, if you're filing late or amending, the taxpayer is not required to provide this type of documentation with the filing of their tax return and with the filing of the Form 5695. However, documentation for these types of expenditures might be required if the return was reviewed or examined by the Internal Revenue Service. So for that reason, we here at the IRS strongly recommend that you retain purchase receipts, installation records, as well as any ENERGY STAR Council labels on, let's say, those doors, those exterior doors and those windows that you purchased, because these documents will also be needed to substantiate the adjusted basis of the overall property, the residence, when it is sold. So with that, Roy, let's pause and tee up our third polling question. All right. Thank you, Rich. Okay, audience, let's move to our third polling question. And that question states the maximum Energy Home Improvement Credit annually is A, 3,200; B, 1,200; C, 2,000; or D, 5,000. Again, take a moment, click the radio button that best answers your question. And if you do not receive the polling question, please enter only the letters A or B that corresponds with your response in the Ask Question text box. Again, your response is time stamped. So I'll give you a few more seconds to make your selection. Submit your answer in the Ask Question feature. All right, what we're going to do is we're going to stop the polling now and let's share the correct answer on the next slide. And actually, the correct answer is, A, 3200. And let me see, I see that 79% of you responded correctly. So, Richard, I think we may need a little bit more clarification for this question. Yes, Roy, thank you. And I agree. So actually, 79% is not bad, given how this overall credit of $3200 is broken out. And it's broken out into two maximum components, $1,200 for those building envelope expenditures, the installation of the qualifying property, such as the air conditioning units, the efficient furnaces, boilers, water heaters, the circuit boards, and then the $150 for the home Energy audit. And then -- so it's -- and the $2,000 added onto the $1,200 would be for the heat pumps, heat pump, water heaters and biomass boilers. Don't worry, you don't have to memorize this because at the end we're going to show you an e-poster that we've created that really is an effective, I'll call it, a cheat sheet to help you understand this when you're advising, clients are looking at these expenditures. So with that, now let's pivot completely away from the Energy Efficient Home Improvement Credit and go to 25D, the Residential Clean Energy Credit. And this offers more households access to and freedom to choose renewable energy that can significantly lower their monthly energy bills and also cut air pollution. The Residential Energy credit provides a significant tax credit, as we'll see, for the purpose of residential clean energy equipment, including battery storage capacity that has at least 3 kilowatt hours of battery capacity. Homeowners are eligible for this credit. Remember, this is not for businesses, this is for homeowners, along with those renters who may purchase qualifying clean energy property for the residence that they're living in. The Residential Clean Energy Credit provides a 30% credit to lower the installation cost, which can be fairly significant of residential clean energy qualifying properties and that could include rooftop solar, wind generation, geothermal and the battery storage. So moving on to the next slide, there are no dollar limits. Well, excuse me -- it's 30% of the qualified expenditures, but there is no dollar unit -- a dollar limit, excuse me, like those lower caps we were discussing with the Energy Efficient Home Improvement Credit. The IRA extends the Residential Clean Energy Credit through 2034 and modify the applicable credit percentage rates, as we'll see. And then for the first time, it added battery storage technology as an eligible expenditure. And this credit applies for property placed in service after December 31, 2021 and before January 1 of 2025. Now, in the later years, as you see on this slide, the credit, while it begins at up to 30% of the property installed, it will phase down incrementally to 26% of the property placed in service in 2033, 22% of the property placed in service in 2034, and then there's no credit under existing law available for the property if it is placed in service after December 31, 2034. Remember though, when you're taking this credit, and this was the case with the previous discussion of the EE, Energy Efficient Home Improvement Credit, the cost basis of the residence must be reduced by the amount of the credit taken. So on our next slide here we look at the types of expenditures or categories -- property categories that are eligible for the Residential Clean Energy Credit 25D at 30% of the cost. And remember here when we're talking about Residential Clean Energy Property with the 25D credit, you see the examples there; solar, solar water heating, solar wind energy, geothermal heat pump, fuel cell and that battery storage technology beginning with 2023. These are all separate from that component of the Energy Efficient Home Improvement Credit which had a credit for residential energy expenditures. The qualified -- and what's interesting about this credit, one of many things that are interesting, again, first it's for new installations. So they have to be new solar panels, solar water heaters, new wind turbines, geothermal heat pumps, it all has to be new, not previously owned. And here, unlike previously with the prior credit we discussed, the expenses may include labor costs for onsite preparation, assembly, original installation of the property, also for piping or wiring to connect it to the home. Traditional building components that primarily serve as roofing or structural function, they don't qualify. So traditional roofing doesn't qualify. However, if you put in solar roofing tiles and solar shingles that have the requirement to have trusses or shingles to support those solar panels, that could be part of the installation cost and take 30% of that and we'll come back to that when we get to the FAQs. Now moving on to the next slide, I want to reinforce that there is no overall dollar limit for the Residential Clean Energy Credit. It's generally limited to 30% of the qualified expenditures made through 2034, although it will be decreased in increments, as I discussed on a prior slide. There is a credit for fuel cell property expenditures that's 30% of the expenditures, up to a maximum of $500 for each half kilowatt of capacity of qualified fuel cell property. And this will all be covered in the instructions to Form 5695. Now staying with the Residential Clean Energy Credit on the next slide, the fourth continuation of this topic, the solar -- this property has to meet certain requirements. So for solar water heating property, the property must be certified by a nonprofit agency called the Solar Rating Certification Corporation or a comparable entity endorsed by the government of a state in which that property is actually installed. For geothermal heat pump property that must meet the requirements of the ENERGY STAR program which are in effect at the time the expenditure for such equipment is made. Again, to repeat, the battery storage technology property must have a capability capacity of 3 kilowatt hours or greater. And for any fuel cell property installed eligible for this credit, it's up to $500 for fuel cell property for each 1/2 kilowatt of capacity. Now on this slide you see a chart that has the qualified solar electric property costs for property in a dwelling unit, again in the United States. For all of these, the property has to be in the US. Qualified solar water heating property costs for property to heat the water in the US and it's derived from the sun, hence the solar. You might put in small wind turbines on your property. Qualified small wind energy property costs are cost for property that use the windows turbine at your residence to generate electricity for your dwelling in the US. For the geothermal heat pumps that you see on the chart there, those are the costs for qualified geothermal heat pump property installed in the dwelling unit, again in the US. The qualified fuel cell property there, those are limited to your principal residence. And I'll probably come back to the distinction between residents and purple residents in the FAQ -- when we have the Q&A. But for qualified fuel cell property costs to get that portion of the credit, it has to be your principal residence. And that's defined under code section121, which ties in with the exclusion of gain if you meet certain requirements when you're selling your primary residence. The battery storage technology costs that again, the battery storage is for a dwelling unit in the US in your residence with that capacity of 3 kilowatt hours. Now let me move on to the next slide where you see these ratings and the benefits of bookmarking Irs.gov/cleanenergy and you can go to the residential energy credits is it links over to these other rating agencies such as the Solar Rating Certification Corporation or Comparable Energy and the ENERGY STAR program. Many of you are familiar probably with ENERGY STAR because these are important requirements that have to be documented by the taxpayer and retained in their records when they're filing their tax return. For the geothermal heat pump property, that again must meet the requirements of the ENERGY STAR program that are in effect because these requirements can change over time, but in effect at the time that you spent the money and installed the equipment. And once again, the battery storage technology must have a capacity of 3 kilowatt hours or more. Now we're going to look at that concept of qualifying residents I alluded to a moment ago because there are different rules for some of each of these credits. So we're back now back to the Energy Efficient Home Improvement Credit and look at the definition of qualifying residents for the 25C credit. To claim this credit, the Energy Efficient Home Improvement Credit, the improvements have to be to your main home or principal residence as you see on the slide, and this is generally your main home where you live most of the time. Once again, the home must be in the United States. It must be an existing home that you improve or add on to, not a new home that you're constructing. It must be your primary residence where you live the majority of the year. Remember again that landlords who might be renting out the property, they cannot claim the credit because they don't live in the home. But what about if you use a portion of your principal residence for the business use of the home deduction if you're in business for yourself? Well, here if the home is used partly for business, the credit for eligible clean energy expenses for the Energy Efficient Home Improvement Credit, if your home office -- excuse me, your business use of the home is 20% or less, you can claim the full Energy Efficient Home Improvement Credit for the qualified expenditures. On the other hand, if you are claiming the home energy credit -- excuse me, the home energy deduction, and it's more than 20% of the square footage on your home, then the credit is based, you have to break it out essentially and only claim the share of expenses allocable to non-business use. And we do have an FAQ on irs.gov that qualifies this. So remember to wrap up this slide. The Energy Efficient Home Improvement Credit can only be claimed for qualifying expenditures incurred for an existing home or addition or renovating to an existing home, but never for a newly constructed home. Now here we have the Residential Clean Energy Credit and what is a qualifying residence for this credit, 25D? So here the improvements are to your main home, whether you own it or rent it, you could be a lessee renting your main home and make these types of expenditures. Solar expenditures, small wind energy, geothermal heat pump property battery as you see on the slide and claim the credit. Once again, new or existing homes that have to be in the US, you can't claim the Residential Clean Energy Credit if you are a landlord or any other property owner who does not live in the home. Now this is interesting in that you may be able to claim a credit for certain improvements made to a second home located in the US that you live in part time but do not rent to others. You cannot claim a credit for fuel cell property for a second home or for home that's not in the US and again on irs.gov we have definitions of qualifying residents for the credit. Same rules for the business use of the home, if it's 20% or less, you could get the full credit, Residential Clean Energy Credit; more than 20% credit, separate business credit for business use of the home, then you have to allocate the expenses to non-business use. So with that, Roy, let me pause now, catch my breath and let's get to our fourth polling question for our audience. All right, thank you. Audience, here is our fourth polling question. We're getting down to the end. The Residential Clean Energy Credit can only be taken on the taxpayer's principal residence. Is that A true or B false? Take a moment, click the radio button that best answers the questions and if you do not receive the polling question, then go ahead and enter the letter A or B that corresponds with your response in the Ask Question text box. Your response is time stamped. Audience please remember that you need to answer at least three polling questions and participate in the live broadcast from the official start time for at least 50 minutes to earn one IRS CE credit. The polling question example we did at the beginning does not count towards the requirement. So I'll give you a few more seconds to make your selection and submit your answer in the Ask Question feature. All right, go ahead and go to the next slide and take a look at the answer. And the answer is B; that is false. And we're looking to see how many people responded correctly. And I see that 42% of the people responded correctly. So Rich, can you give a quick clarification on this? Certainly, Roy. So remember, for purposes of this credit on the polling crescent, we're talking about 25D. The benefit is that you could put those solar panels, wind turbines and other qualifying expenditures in your second home. It's a residence that you live in part in. It doesn't have to be your principal home for purposes of this credit. So let's move on now because we do want to have some time for some Q&A and some of what I'm going to go through now fairly briskly we've covered before. So we're back to the Energy Efficient Home Improvement Credit. As you can see here, it could include labor costs for on site preparation, assembly or installation of residential energy property. Those would be things such as the air conditioners, central air conditioners, I should say, natural gas, propane, oil, water heaters. And however, so for those portions of the Energy Efficient Home Improvement Credits, labor could be part of the calculation -- the labor cost, I should say. In contrast, the taxpayer may not include the labor costs for the building envelope components, the insulation material, the exterior windows, skylights, doors, those are components for which the taxpayer pays a fixed price when you're buying it. So then you're going to have to make a reasonable allocation between the cost of the property and the non-qualifying labor cost which you cannot bring into the calculation. Now in the next slide we'll pivot to the Residential Clean Energy Credit. This would include the labor costs which could be significant for solar roofing tiles, solar roofing shingles, solar electric collectors. So these are what I would call big ticket expenditures and these would include labor costs for the 25D Residential Clean Energy Property Credit. Now on the next slide, just to repeat some things we've said earlier. The credit, remember, is non-refundable, I think everybody gets that by now. It has to be for new property. Used property is not eligible. Labor costs are limited to the Residential Clean Energy Credit. What about government subsidies? And here I highly -- because some of these governments, local governments, you might have a public utility that provides a subsidy for the purchase and installation of energy conservation improvements. That subsidy is not part of the government -- excuse me, of the customer's gross income for federal tax purposes. But if you're getting a subsidy from a public utility, you cannot claim this credit for the amount of the subsidy that's used to purchase or install the qualifying property. You can't double dip. So you get a tax free benefit with the subsidy, but you can't take that amount as part of your calculation of the credit. Rebates, you could get a rebate from the purchase price or the cost of the property. Typically rebates are reductions, they're non-taxable and they're reductions in the cost of the property. So it would be that net cost that for which you would calculate the credit. And then some states have state energy efficiency incentives where and here you might have to go back to a specific state and see how they're -- what language they use. Generally, if it's a state incentive, the taxpayer is not required to reduce the purchase price or cost of the property that they're buying or acquiring with the government energy incentive unless that incentive qualifies for a rebate under federal income tax law. And we're not going to cover those provisions of the code today. So keep in mind, each state could be different. Some states label these incentives as rebates and these incentives are not actually rebates or purchase price reductions and they could conceivably be part of the gross income for the taxpayer. Now on the next slide, when do you claim the credit? The Credit is claimed in the year that the property is installed, not the year of purchase if that's earlier than the year in which it was installed. Remember, there's a five year requirement for the property must remain in service or expected to remain in service at least five years. Important takeaway today for the next number of years, there's no lifetime limit on these credits as there was under prior law. One new concept, carry forwards. We know it's nonrefundable. You cannot carry forward any unused Energy Efficient Home Improvement Credit to a subsequent year, but you can indeed carry forward an unused Residential Clean Energy Credit to a subsequent year. I want to briefly show you, on the next slide we have the draft versions. These are on irs.gov of certain forms. We don't have the final version of the 24 Form 5695, but you're looking at page one, which is the Residential Clean Energy Credits, and then on the next slide is page two. We also have the draft instructions on irs.gov, so you might want to take a look at that. We expect the final version of these forms and instructions to post later to irs.gov this year. And then these two -- this slide and the next one I'm going to show have what I think are pretty terrific e-posters. This is a one pager. You can download it, print it, save it, Publication 5967 on the Energy Efficient Home Improvement Credit and it breaks out those various subcomponents. And then on the next slide you have Publication 5968 for the Residential Clean Energy Credit. And these would be great if you're a tax professional, providing them to your staff, your customers, et cetera. And finally, just to wrap up with our resources and you do have these slides, I highly recommend those FAQs. They're a great set of FAQs. A lot of the questions I receive can be answered in the FAQs. The ENERGY STAR website, the Department of Energy has resources. We have a whole section on irs.gov for the Inflation Reduction Act. And then finally on the final resource slide, again, irs.gov home energy on the next slide. There we go. One stop shop for information on all these Department of Energy. And if you really like to read the code, that first bullet covers the Inflation Reduction Act. So Roy, let me turn it back over to you for I think we have one final polling question. Thank you, Richard. We do. Audience this polling question is really an attendance check. So please select the radio button on the screen. If you do not receive the polling question, only add the letter A as your response in the Ask Question text box to timestamp your response. And please remember that you need to answer at least three polling questions and participate in the live broadcast from the official start time for at least 50 minutes to earn your one IRS CE credit. The polling question example we did at the beginning of this presentation does not count towards this requirement. And thank you for responding to that polling question. And now what we'll do is we'll move to our Q&A section where Richard will be answering as many of your questions as time permits. So before we start, let's thank Richard for his valuable information. Thank you, Richard. Hello again, audience. It's me, Roy Chaney, and I'll be moderating the Q&A session. But before we start the Q&A session, I want to thank everyone for attending today's presentation; Energy Efficient Home Improvement Credit & Residential Clean Energy Property Credit: How the Inflation Reduction Act revised these credits. Earlier I mentioned we want to know what questions you have for our presenter. Here is your opportunity. If you haven't input your questions, believe me, there's still time. Go ahead and click on the dropdown arrow next to Ask Question field and type in your question and then click send. Richard is staying on to answer all of your questions. But one thing I want to say before we start, we may not have time to answer all the questions submitted, but we'll answer as many as time allows. So let's get started so we can get to as many questions as possible. All right, let me take a look. Here we go. Here's question number one for you, Richard. Are these energy credits available for installations on only existing homes, or do newly constructed homes qualify? Well, thank you, Roy. And that is a great question and one we've received on more than one occasion. So the rules vary depending upon which of the two credits we're talking about. So first, for the Energy Efficient Home Improvement Credit, the taxpayer can claim the credit, but only for qualifying expenditures that are incurred for an existing home or for possibly addition or renovation to an existing home, but never for a newly constructed home. However, it's different, Roy, that under the Residential Clean Energy Property Credit, that's the credit under 25D, the taxpayer can claim the credit for qualifying expenditures incurred for either an existing home they live in or possibly a newly constructed home. Roy? Thank you, Rich. Let me check the area here. We have another question here, Richard. It's asking, can Mr. Furlong comment on roofing expenses for solar installation? Are these costs including in the calculation of the credit? So, Mr. Furlong would be happy to comment on roofing expenses for solar installation, another question that has come up to Stakeholder Liaison. So generally speaking, traditional roofing materials and structural components do not qualify for the Residential Clean Energy Property Credit and this is because they primarily serve a roofing or structural function. However, some solar roofing tiles and some solar roofing shingles, they also serve as solar electric collectors while they continue to perform the function of traditional roofing on the home. So if these solar roofing tiles and solar roofing shingles are serving as solar electric collectors in addition to performing that traditional function of roofing, then they can qualify for the credit in that circumstance. And Roy, we do have a -- one of our frequently asked questions on IRS.gov covers this exact scenario. All right, thank you Rich. We have more to get to though. Here's question I believe it looks like number three. I know that these are non refundable credits, but they say what about any carry forward of the unused credits to a future year? Are there any carry forwards for these credits? Great question, because taxpayers and tax pros are always looking at credits and determining whether there's a carry forward or conceivably a carry back provision. And here the rules differ depending upon which of the two credits we've discussed today. So let me address first the Energy Efficient Home Improvement Credit, again, that's 25C, for that credit the taxpayer may never carry the credit forward. So for example, if the taxpayer did not have sufficient tax liability to claim all or even a portion of the credit in the year in which the related property for which the qualifying expenditure was placed in service or installed, then that unused amount of the Energy Efficient Home Improvement Credit can never be claimed and never carried forward. On the other hand, for the Residential Clean Energy Property Credit, again that's 25D, a taxpayer may indeed carry forward the unused portion of the credit and that could reduce their tax liability in future years, Roy. Thank you, Richard. I'm pretty sure they enjoyed that. But we have more to get to. So we want to know, can you review again the types of residences that actually qualify for these energy credits? Number one, are they available only to a main home? And number two, what about second homes or any vacation homes? Okay, so there are some differences. So bear with me while I walk us through the differences for the different credits and for those that qualify only for the principal or primary residence, those that may qualify for any residence, including a second home and what was a renter, somebody renting a home might qualify for. So to begin, the credits are available only for certain types of improvements made to the second home and, this is important, the credits are never available when improvements are made to homes that are not used by the taxpayer. So, for example, if the taxpayer is a landlord and is renting out their property, they can never use any of these credits for improvements made to homes that they rent out but do not use at any time as a resident for themselves. However, if a taxpayer is renting as their principal resident and makes eligible improvements, in other words, they're paying rent to a landlord, then the renter, a taxpayer, may be available to that tenant. Now, drilling down a bit, the Energy Efficient Home Improvement Credit has these requirements. And remember, the Energy Efficient Home Improvement Credit has subparts that we discussed earlier. So first, looking at those exterior doors, those windows and skylights, the insulation materials or systems, possibly the air sealing materials or systems, for those installations, the home must be located in the United States, it must be owned and used by the taxpayer as the taxpayer's principal residence. The home where they and the principal resident gets into all the facts and circumstances, including their place of employment, their mailing address, where they get bills and correspondence, where they basically spend the majority of their time. Now, still sticking with the Energy Efficient Home Improvement Credit, you have those central air conditioners, the natural gas, propane or oil water heaters; you have the natural gas propane, oil furnaces and hot water boilers, electric gas and natural gas heat pumps, electric gas -- excuse me, panel boards, sub-panel boards, branch circuits, in that situation, for those types of expenditures, the home can be a second residence. Again, it must be in the United States, but it's not limited to the principal residence for those hot water heaters, the panel board installations, et cetera. And then the third part of the Energy Efficient Home Improvement Credit was that smaller credit of up to $150 as a portion of the home energy audit cost. And there that home energy audit must be on the principal resident, but it could include a renter who is paying for a home energy audit on the apartment or the condo or the home that they're renting for. Now then, quickly shifting gear to the Residential Clean Energy Property Credit, remember, that's 25D and here we're talking about solar water heating property, solar electric property, small wind energy property, geothermal heat pump property, battery storage expenditures; for these types of expenditures and expenses, the home must be located, again, in the US, that's pretty consistent, and used as a resident. Not necessarily the principal residence, it could be a second residence by the taxpayer and also again, include renter. However, under the Residential Clean Energy Property Credit, 25D, there is an allowance for fuel cell property expenditures. In that situation, it must be the principal residence in the US to take that fuel cell property expense. All of that quite a bit to toss that to, but, again, the frequently asked questions do a good job of reinforcing what I just said, Roy. Excuse me, Roy. All right. Thank you, Richard. Audience we're kind of getting close to the time, but I believe we have time for maybe one or two more questions. So I'm looking here, Richard, it says you mentioned that a home energy audit may qualify for up to the 150 of the energy credit, and you provided some more specifics on that. But can you talk one more time what are the credit limitations for doors, windows and central air conditioners? Certainly, Roy. So the home energy audit must be an inspection of a dwelling, and that could include a condominium and also certain manufactured homes. Not surprisingly, the home must be in the United States. It must be owned or used by the taxpayer as the taxpayer's principal residence. So again, a renter could claim this credit for the home energy audit. The home energy audit must, though, have a written report at the end of the audit that's provided to the taxpayer. That's the substantiation that the audit occurred. And that written report, Roy, identifies the most significant and cost effective energy efficient improvements for that dwelling. And it could include an estimate of the energy and cost credits or cost savings, I should say, for each improvement. Now, the auditor, him or herself, the order must meet the certification or other requirements that at some point in the near future, the Department of Energy, excuse me, the Department of Treasury and the Internal Revenue Service will provide forthcoming guidance. So we're going to provide guidance to the qualifications for these home energy auditors, Roy, at some point in the future. So I hope that helps the audience. All right, I appreciate that. Audience, unfortunately, that is all the time we have for questions today. I want to thank Richard Furlong for answering your questions as well as for sharing his knowledge and expertise. But I'm going to turn it back over to Richard to share some final key points. Richard, the floor is yours. Thank you, Roy, and it's always great working with you on these webinars. So before we leave today's presentation, let me provide you a brief recap of the key points that we would like you to take away from today's webinar. So first, the Inflation Reduction Act both expands and extends the tax credit for qualifying energy improvements to your home, the Energy Efficient Home Improvement Credit, one more time that's Internal Revenue Code 25C, that is a maximum credit of 30% of the cost of qualifying home improvement up to a maximum of $3,200 in a particular year if all the requirements are met. Now the Residential Clean Energy Credit, which is 25D under the Internal Revenue Code, that's a 30% of qualified expenses for certain qualified energy installations to the taxpayers home. Eligible taxpayers will claim either or both of these credits on the Form 5695, which is entitled Residential Clean Energy Credit, and they'll attach that to their tax return for the year. And then finally, Roy, as we know, there are extensive resources for both of these credits at our IRS website, and I would recommend searching under irs.gov/homeenergy, one word, irs.gov/homeenergy. And with that, Roy, let me bring it back to you to close this out. All right. Thank you, Richard. Audience if you attended today's webinar for at least 50 minutes after the official start time and answered at least three polling questions during the live broadcast, you will receive a Certificate of Completion for one IRS CE credit. Again, the time we spent chatting before the webinar started doesn't count towards the 50 minutes and the polling question example does not count towards the three minimum questions response requirement. Audience, it's important for you to know that Certificate of Completion will be emailed to the registration email address of qualifying participants as a PDF attachment. The email will come from the email address seen on this slide at cl.sl.web.conference.team@irs.gov. Please add this email address to your contacts to ensure you receive the email with the certificate attached. If you qualify for the IRS' Continuing Education Credit for this webinar and registered with your valid first name, last name and PTIN as it appears in your IRS PTIN account, your CE credit will be posted in your IRS PTIN account. If you are eligible for Continuing Education from the California Tax Education Council, your credit will be posted to your CTEC account as well. Now, if you qualify and have not received your Certificate of Credit by November 29th, please email us at cl.sl.web.conference.team@irs.gov, the email again shown on this slide. If you are interested in finding out who your local Stakeholder Liaison is, you may send us an email using the address shown on this slide and we'll go ahead and send you that information. We would appreciate it if you would take a few minutes to complete a short evaluation before you exit. If you'd like to have more sessions like this one, please let us know. If you have thoughts on how we can make them better, please let us know that as well. If you have any requests for future webinar topics or pertinent information you'd like to see in an IRS fact sheet, tax tip or FAQ on IRS.gov website, then please include your suggestions in the comments section of the survey. Click the survey button on the right side of your screen to begin. If now if it doesn't come up, check to make sure you disabled your pop up blocker and it has been a pleasure to be here with you and on behalf of the Internal Revenue Service and our presenter Richard Furlong, we would like to thank you for attending today's webinar. It is important for the IRS to stay connected with the tax professional community, individual taxpayers, industry associations, along with federal, state and local government organizations. You make our job a lot easier by sharing the information that allows for proper tax reporting. Thanks again for your time and attendance. 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