Energy Tax Credits for Homeowners

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Thanks to an extension by Congress, you may still be able to take energy credits if you make qualifying purchases for your home through 2016.

There are two types of energy credits for homeowners - the Residential Energy Efficient Property Credit and the Non-Business Energy Property Credit.

Residential Energy Efficient Property Credit

What is the credit?

You may qualify for this credit if you make energy-saving improvements to your home. It can be your existing home, or a home being constructed. This home does not need to be your main home (unless the credit is for fuel cells), but it does need to be located in the United States.

How much is the credit worth?

The Residential Energy Efficient Property Credit may be worth 30% of your cost of qualified property. You can include any labor costs for the onsite preparation, assembly, or original installation of the property.

What kind of property qualifies?

Alternative energy systems such as solar electric, solar hot water, fuel cell, small wind energy, and geothermal heat pump property, may qualify for the credit. For purposes of this credit, you can rely on the manufacturer's certification in writing that a product qualifies for the credit.

What if I don't owe enough tax this year to take the full credit?

If you cannot use all of the credit because of the tax liability limit, you can carry the excess credit to the following year.

Does taking the credit change my basis in my home?

You must reduce your basis in the home by the amount of any credit allowed.

Where can I find this credit on my tax return?

TaxAct reports your credit on Form 5695, Residential Energy Credits.

Non-Business Energy Property Credit

What is the credit?

The Non-Business Energy Property Credit pays you back for up to 10% of the amount paid or incurred for qualified energy efficiency improvements installed during the year, plus any residential energy property costs.

Your total credit cannot be more than the lifetime limit of $500 for all years after 2005. Of this credit, only $200 can be for windows, $50 for any advanced main air circulating fan, $150 for any qualified natural gas, propane, or oil furnace or hot water boiler, and $300 for any item of energy efficient building property.

If you have already taken at least $500 in nonbusiness energy property credits in previous years, you cannot take this credit in 2013.

What kind of property qualifies?

The following improvements may be used for the credit if they meet certain requirements for energy efficiency:

  • Insulation material or system specifically and primarily designed to reduce heat loss or gain
  • Exterior windows, including skylights
  • Exterior doors
  • Any metal or asphalt roof with pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home

The following residential energy properties also qualify:

  • Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heaters; and stoves that use biomass fuel
  • Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers
  • Certain advanced types of main air circulating fans used in natural gas, propane, or oil furnaces

What if I own a condo and the condominium association paid for the energy-saving improvements?

For purposes of these credits, if you are a member of a condominium management association for a condominium you own, or you are a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation.

Does taking the credit change my basis in my home?

You must reduce the basis of your home by the amount of any credit allowed. Your basis is generally the amount you paid for your home, plus the cost of any improvements.

Where can I find energy credits on my tax return?

TaxAct reports your credit on Form 5695, Residential Energy Credits.

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Upcoming Tax Dates

May 10 — Employees who work for tips
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File Form 941 for the first quarter of 2018. This due date applies only if you deposited the tax for the quarter timely, properly, and in full.

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If the monthly deposit rule applies, deposit the tax for payments in April.

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