Tax Credits for Energy Efficient Home Improvements

Home Energy
Tax Credit

There is one energy tax credit currently available for 2020 - and 2019 - Tax Returns: the Residential Energy Efficient Property Credit. You may claim this nonrefundable tax credit on your return via Tax Form 5695 - the eFile.com tax app will generate this for you.

If you have any of the following properties placed in service through December 31, 2021 listed below. This means that not only can you claim the credit on your 2020 - and 2019 - Tax Returns, you may also claim it on your 2021 Federal Income Tax Return, as well as 2019 and Prior Year Returns

  • solar electric
  • solar water heating
  • small wind energy
  • geothermal heat pump
  • fuel cell (up to $500 for each 1/2 kilowait of the property's capacity)

Here is information on the solar related tax credits: https://www.efile.com/tax-form/ef/solar-tax-credit.pdf

Let eFile.com help you if you're confused about energy efficient home improvement tax credits. When you prepare and efile your return on eFile.com, we will select the form 5695 for you you based on your answers to several tax questions, and we will report any credits on your return if you qualify for them. However, please read on if you want more detailed information on home energy tax credits.  Publication 530 will have more other important homeowner tax related information.

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 claim the Residential Energy Efficient Property Credit (that's a long name for a good credit!) for a percentage of your total cost you paid. The percentage amount varies based on the date you placed the service in your home (the amounts are below). 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.

  • 30%: After December 31, 2016, but before January 1, 2020
  • 26%: After December 31, 2019, but before January 1, 2021
  • 22%: After December 31, 2020, but before January 1, 2022

In order to qualify for the credit, the energy-saving improvements must have been made in a home located in the United States. You must own the home (rentals do not count), but it does not have to be your main home. The credit may also be claimed for newly constructed homes, and all installation costs may be included.

Here are the different energy-efficient products that qualify for the credit:

  • Solar water heaters
  • Solar panels
  • Small wind turbines

To claim the Residential Energy Efficient Property Credit on your tax return, when you prepare your return on eFile.com, we will prepare Form 5695, Residential Energy Credit, for you and it will be e-Filed with your return.

Nonbusiness Energy Property Credit

The tax credit has been extended for 2018 and 2019 Tax Returns. If you did not claim the credit on your 2018 Tax Return, you will need to prepare and file an amended tax return

If you made certain energy-saving or energy-efficient home improvements in 2019, you could get a tax credit for up to 10% of the purchase price of qualified products, up to a maximum total $500 amount for all Tax Years after 2005 (for windows, it's a $200 total maximum amount), installed during 2019. 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 2019's $500 "lifetime" credit cap (the lifetime cap is $200 for windows).

In order to claim this energy credit on your 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.

You will need to provide tax document to prove that you 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.

Home Improvements that Qualify for the 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.

Other Ways to Save on Home Improvements

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