The tax break that could save YOU nearly $4,000 this winter: Experts urge homeowners to take advantage of scheme to help fund energy efficiency improvements – and shave money off your bills

This winter, Americans are being urged to go green and save – getting thousands of dollars on home improvements that will lower their energy bills.

Up to $3,200 in tax credits can be claimed each year for various home improvement projects, such as installing insulation, heat-efficient windows, doors and electric heat pumps.

According to government estimates, these efficiency-enhancing measures could cumulatively save households nearly $750 per year.

The Energy Efficient Home Improvement Tax Credit reimburses 30 percent of the cost of a project up to a certain ceiling: about $2,000 for a heat pump and $1,200 for improving insulation per year.

The stimulus measures were introduced as part of the Inflation Reduction Act (IRA), which was signed into law by President Biden in August 2022, and went into effect earlier this year.

Americans can invest in making their homes more energy efficient this winter and claim up to $3,200 in tax credits. The photo shows a man shoveling snow outside his home in Providence, Rhode Island

Heat pumps do not generate heat, but redistribute it around a house. Pictured is a newly installed heat pump mounted on the side of a house in Windham, Maine

Of the total redeemable credit worth $3,200, $2,000 can be obtained if homeowners purchase and install a heat pump that has the highest efficiency rating from the Consortium for Energy Efficiency (CEE).

On average, it costs between €4,000 and €8,000 to install a heat pump. according to to the American Society of Home Inspectors.

The $2,000 credit also applies to heat pump water heaters, which use the same principle to heat water.

A household would have to spend approximately $6,700 on a qualifying pump to claim the full $2,000 credit.

In that case, once the tax deduction is granted, the pump would end up costing them just under $4,000.

How much it will then save in terms of heating costs will vary greatly depending on local climate and energy costs, but the Ministry of Energy claims Americans can generate annual savings of about $500.

For households with less than 80 percent of the average income in their region, it's an even better deal. In that case, the IRA covers the entire purchase and installation amount of the heat pump, up to a maximum of $8,000.

This tools from Fannie Mae can be used to identify the median income in your neighborhood.

The Energy Efficient Home Improvement Tax Credit Program offers up to $1,200 in credit for installing insulation

The incentives were introduced as part of the Inflation Reduction Act (IRA), which was signed into law by President Biden in August 2022

According to the Energy Departmentbuildings consume 40 percent of the energy used in the US. And the average American spends about $2,000 annually on energy, of which $200 to $400 could be lost to drafts and air leaks.

“You want to minimize heat loss to the outside through walls, windows, drafts, etc. and deliver heat as efficiently as possible,” says Steven Nadel, executive director of the American Council for an Energy-Efficient Economy, told CNBC.

As part of the Energy Efficient Home Improvement Tax Credit Program, tax credits are therefore also available for installing insulation and draft-free windows and doors.

Homeowners can claim up to $500 per year to install heat-efficient exterior doors, $600 for windows and skylights and $1,200 for insulation and air sealing materials. But the combined tax credit for these projects is limited to $1,200 per year.

These credits, combined with the separate $2,000 heat pump credit, bring the total to $3,200.

Energy Star, a government-run program established in the 1990s to promote energy efficiency, has suggested that households can save 12 percent a year with double glazing. Assuming annual bills are about $2,000 per home, that would be about $240 per year.

The cost of double glazing can range from $300 to over $5,000 – and that doesn't include the cost of installing it.

The credits are available until 2032 and can be claimed annually. The tax deduction would be applied when they file their annual tax returns, and households will need to have some tax liability to benefit from it.