Can I Claim Tax Credits for Energy Efficient Home Improvements?
Important: Though the credits below expired on December 31, 2016, they were brought back for 2017 tax return as part of the two-year budget deal passed on February 9, 2018. The IRS is reviewing the legislation and will provide additional information as soon as possible for taxpayers wishing to claim the credits on their 2017 tax returns.
There are two energy tax credits available for Tax Year 2016 and earlier: the Residential Energy Efficient Property Credit and the Nonbusiness Energy Property Credit.
What Is the Residential Energy Efficient Property Credit?
If you made energy saving improvements to your home by installing an earth-friendly energy source, you may be able to take advantage of the Residential Energy Efficient Property Credit (that's a long name for a good credit!). The credit could be worth up to 30% of the total cost of installing certain renewable energy sources in your home. It is not restricted to your primary residence (except for fuel cells), and it may be claimed for newly constructed homes. However, you must own the home (rentals do not count). All installation costs may be included. Better yet, there is no cap or upper limit on the Residential Energy Efficient Property Credit (except for on wind turbines and fuel cells--but the caps on those are generous).
Is There a Dollar Limit for the Residential Energy Efficient Property Credit?
For most types of property, there is no dollar limit on the credit. However, if your credit is more that your taxes owed, you can carry over your unused portion of the credit to your tax return for next year.
Will the Residential Energy Efficient Property Credit Expire?
The Residential Energy Efficient Property Credit is currently available for property placed in service through December 31, 2016.
How Can I Qualify For the Residential Energy Efficient Property Credit?
The energy-saving improvements must have been made in a home located in the United States. However, it does not have to be your main home (unless you're installing a qualified fuel cell property).
What Home Energy Sources Qualify for the Residential Energy Efficient Property Credit?
Here are the different energy-efficient products that qualify for the credit:
- Geothermal heat pumps
- Solar water heaters
- Solar panels
- Small wind turbines (up to $4,000)
- Fuel cells (up to $500 for each 0.5 kilowatt power capacity) (primary residence only)
How Can I Claim the Residential Energy Efficient Property Credit on My Tax Return?
You can use Form 5695, Residential Energy Credits.
Can I Still Claim the Nonbusiness Energy Property Credit on My Tax Return?
If you made certain energy-saving or energy-efficient home improvements in 2016 or earlier, you could get a tax credit for up to 10% of the purchase price of qualified products, up to a maximum amount of $500 for all your home improvements (a maximum of $200 for windows) made during 2016. Some installation and labor costs also qualify for the credit.
This energy efficient home credit is only available to those taxpayers who did not claim more than $500 worth of home energy tax credits in an earlier year. If you received home energy credits from Tax Years 2005-2011, you must subtract the amounts you received from 2016's $500 "lifetime" credit cap (the lifetime cap is $200 for windows).
How Can I Qualify For the Nonbusiness Energy Property Credit?
In order to claim this energy credit on your 2016 or earlier Tax Return, you must have purchased the qualified improvements and placed them into service during the appropriate Tax Year. To qualify for the credit, the energy-saving improvements must have been made on an existing home (not a new construction) which was your primary residence, and which you owned. The home must also be located in the United States.
What Tax Documents Can I Provide to Prove That I Qualify for the Credit?
You should have written certification from the manufacturer that produces the qualifying product. This certification is usually included with the product's packaging or posted on the manufacturer's website. Though you can report the information on your tax return, do not include the original documentation in your return; keep it with your tax records.
What Energy Saving Home Improvements Qualify for the Nonbusiness Energy Property Tax Credit?
Here are the various energy-efficient products which qualify for the credit, and the maximum amount that can be claimed for each:
- $300 for biomass stoves
- $50 for advanced main air circulating fans
- $300 for air source heat pumps
- $300 for central air conditioning
- $150 for gas, propane, or oil hot-water boilers
- $150 for gas, propane, or oil furnaces
- $300 for gas, propane, oil, or electric heat pump water-heaters
- $500 for energy-efficient doors (installation costs do not count)
- $500 for energy-efficient skylights (installation costs do not count)
- $200 for energy-efficient windows (installation costs do not count)
- $500 for insulation (installation costs do not count)
- $500 for metal or asphalt roofing (installation costs do not count)
Remember that only $500 of all combined qualified costs may be credited.
What Are Other Ways I Can Save Money on Home Improvements?
In addition to home energy credits, there are many other tax breaks and tax deductions available to homeowners.
Learn about other federal tax credits.
See what tax deductions you may qualify to claim on your tax return.