Getting The Most Out of The 25C Tax Credit

Consumer online searches have already started trending upward on how to take advantage of the 25C tax credit, as well as other tax incentives and federal rebates.

The first thing to understand is that the rebate specifically excludes labor for installing or preparing to install insulation. See IRS publication FS-2022-40 (See Q1 A1 in the Labor section)

Since the 25C only covers 30% of the cost of materials, this means the consumer must account for $4,000.00 worth of materials for them to receive the full $1,200.00 in rebate. That said, the 25C does allow $150.00 of the rebate to go toward the energy audit of the home, which would leave you still needing to show $3,500.00 worth of materials.

So how do you do it? First off, you need to air seal before the insulation goes in. This may mean vacuuming out the existing insulation. That might include a charge by the hour for the vacuum, bags, and dump fees. After that you may use foam kits, can light covers, attic hatch cover, rulers, bags of insulation, delivery fees, plastic, tape, baffles, staples, and much more.

The point is, you may have to itemize your charges and weigh them heavily toward every supply or material used. For 2023 this will be easy to do, but in 2024, the requirement is added where the person filing the taxes in 2025 will need to show a manufacturer’s product identification number, for materials used on the project. (See IRS Document linked P.5)

Regarding who gets the rebate and how, the tax credit goes directly to the consumer when they file their taxes. They simply download or have their tax filer fill out and add form 5695 to their return.

The main point in all of this is that you will need to provide them an invoice for materials used. Performing an energy audit will help buffer the amount of materials you will need to use for them to qualify for the rebate. On the plus side, it certainly provides incentive for consumers to have you install baffles in every bay, provide an upgraded air sealing package, install can light covers, and seal up the attic hatch.

If you have other questions on the Inflation Reduction Act, tax credits, rebates & incentives, or any of the products IDI carries, reach out to your local branch or contact any of us at IDI, where we look forward to earning your business every day.

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