Tax Guide

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Residential Energy Credits

Making energy-efficient upgrades to your home is a great way to save money on utilities, but it can also give you a break on your taxes.

The Residential Energy Credits are technically two credits, the Residential Energy Efficient Credit and the Nonbusiness Energy Property Credit. They're both claimed on Form 5695, as Part I and II of that form.

 

Nonbusiness Energy Property Credit

The Nonbusiness Energy Property Credit gives you up to 10% back on the cost of making qualifying energy-efficient improvements to your home, plus any residential energy property costs for the year. The credit covers these kinds of energy-efficient home improvements:

  • Windows, doors and skylights
  • Insulation that reduces heat loss or gain
  • Roofing that reduces heat gain
  • Heat pumps
  • Central air conditioners

There is a lifetime dollar limit of $500 for the credit. In addition, within that $500 certain items also have limits. See Form 5695 or its Instructions for details.

Energy-Efficient Home Improvements

The Residential Energy Efficient Credit is for 30% back on your costs for certain equipment that uses alternative energy, such as:

  • Solar panels
  • Solar water heaters
  • Wind turbines
  • Geothermal heat pumps
  • Fuel cells
  • Woodstoves
  • Natural gas, propane or oil furnaces and hot water boilers

For this credit, there is no dollar limit, except for fuel cells, where there is a $500 limit for each half-kilowatt capacity.

Claiming the Credits

For claiming the credits, the home must be in the U.S., but it doesn’t have to be your main home. Fill out our Form 5695 screen in your 1040.com tax return.

See also:
Keeping Records for Home Tax Breaks
Tax Breaks for Vacation Homes