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Residential Energy Credits


The nonrefundable Residential Energy Credits are available for individuals who make energy-conscious improvements to the energy efficiency of their home. There are two credits:

  • The Non-business Energy Property Credit, claimed on Part 1 of Form 5695 – Residential Energy Credits, is for physical improvements to the home building itself. This covers energy-efficient insulation, doors, windows, heaters, air conditioners and the like.
  • The Residential Energy-Efficient Property Credit, claimed on Part 2 of Form 5695 – Residential Energy Credits, is for investments in alternative energy, such as solar, wind, geothermal and fuel cells.

Residential Energy Efficient Property Credit (Part I)

You may be able to take a credit of 30% of your costs of:

  • qualified solar electric property,
  • solar water heating property,
  • small wind energy property,
  • geothermal heat pump property,
  • and fuel cell property.

Include any labor costs properly allocatable to:

  • onsite preparation,
  • assembly, or
  • original installation of the residential energy efficient property and piping or wiring to interconnect such property to the home.

The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half
kilowatt of capacity of the property.

Qualified solar electric property costs.

  • Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States.
  • No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed.
  • The home does not have to be your main home.

Qualified solar water heating property costs

Qualified solar water heating property costs are costs for property to heat water for use in your home located in the United States if at least half of the energy used by the solar water heating property for such purpose is
derived from the sun.

Qualified small wind energy property costs

Qualified small wind energy property costs are costs for property that uses a wind turbine to generate electricity for use in connection with your home located in the United States. The home does not have to be your
main home.

Qualified geothermal heat pump property costs

  • Qualified geothermal heat pump property costs are costs for qualified geothermal heat pump property installed on or in connection with your home located in the United States.
  • Qualified geothermal heat pump property is any equipment that uses the ground or ground water as a thermal energy source to heat your home or as a thermal energy sink to cool your home.
  • The home does not have to be your main home.

Qualified fuel cell property costs

  • Costs for qualified fuel cell property installed on or in connection with your main home located in the United States.
  • Qualified fuel cell property is an integrated system comprised of a fuel cell stack assembly and associated balance of plant components that converts a fuel into electricity using electrochemical means.
  • To qualify for the credit, the fuel cell property must have a nameplate capacity of at least one-half kilowatt of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%

Non-Business Energy Property Credit (Part II)

The credit has a lifetime limit of $500, of which only $200 can be for windows. Also, only 10% of eligible energy-saving home improvements installed during the tax year qualify for the credit, but are still subject to other stated maximums.

Qualified Energy Efficiency improvements:

  • Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home when installed in or on such a home.
  • Exterior windows and skylights.
  • Exterior doors.
  • Any metal roof with appropriate pigmented coatings or asphalt roof with appropriate cooling granules that are specifically and primarily designed to reduce the heat gain of your home.

Other Requirements:

  • Windows and doors must now meet Energy Star specifications.
  • Wood stoves must have a thermal efficiency of at least 75%.
  • Natural gas, propane or oil furnaces or hot water boilers must have an annual fuel utilization efficiency of at least 95.
  • Each item must be installed in your primary home. A primary home is the home where you live most of the time, including a house, houseboat, mobile home, condominium, manufactured home, or cooperative apartment.
  • The expenses must be paid or incurred in the current tax year.
  • Purchases made with subsidized energy financing are no longer eligible for the credit.

Qualifying Items / Expenses

  • Insulation material or systems to reduce heat loss or gain
  • Exterior windows, including skylights
  • Exterior doors
  • Roofing designed to reduce heat gain
  • Residential energy property, including labor costs for the on-site preparation, assembly or original installation of the property
    • Natural gas, propane or oil furnaces
    • Hot-water boilers
    • Main air circulating fans used in natural gas, propane or oil furnaces
    • Electric heat pump water heaters – $300 maximum credit
    • Natural gas, propane or oil water heaters – $300 maximum credit
    • Electric heat pumps – $300 maximum credit
    • Geothermal heat pumps – $300 maximum credit
    • Central air conditioners – $300 maximum credit

Forms

5695 – Residential Energy Credits

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