You may have heard much talk about tax credits for energy saving improvements made to your home. A number of improvement costs can be credited against your annual income tax liability, provided they were for your main home located in the United States.
You may be able to take a credit for up to 30% of qualified costs, up to $1,500.
To qualify for the tax credit, costs associated with home energy efficiency improvements must meet a few criteria. First, they must be associated with your main home and must be expected to remain in use for at least 5 years. Per the IRS, you may credit:
- Any insulation material or system that is specifically designed to reduce the gain or loss of heat from your home
- Exterior windows, including some storm windows and skylights
- Exterior doors, including some storm doors
- Any metal roof or asphalt roof, provided has appropriate pigment or cooling granules designed to reduce heat gain of your home, and that it meets Energy Star requirements at the time of purchase or installation
You may also be able to deduct product and installation costs for some electric heat pump water heaters, electric heat pumps, central air conditioners, natural gas water heaters, oil water heaters, propane water heaters, and stoves that use biomass fuels.The same is true for qualified oil, gas, and propane furnaces and hot water heaters, as well as certain advanced main circulating fans used in such furnaces.
Additionally, you can deduct 30% of costs associated with qualified solar electric power or water heating, wind energy power, geothermal pump power, or fuel cells.
Note: these costs needn’t be associated with your main home to qualify for the credit. The total credit limit for this portion is $500 per one-half kilowatt of capacity for the property where the equipment is installed.
To fill out your Form 5695, you’ll need to start by gathering documentation related to any of the above costs. You’ll need to know the costs associated with installing any of the above improvements. This includes not just the cost of the parts associated with the improvements, but also the labor costs for installation.
If you took this credit in 2008, you’ll also want your Form 5695 from that year, in case there was a carry over amount. You’ll also need a copy of your Form 1040. If you qualify for other credits, you may not qualify for the full amount of credits available for home weatherization improvements.
Having your 1040 handy will help you find and enter to relevant data to figure out how much credit you qualify for. (It may sound complicated, but don’t worry. In practice, it’s as easy as following the instructions on From 5695 to find the right numbers on your 1040.)
You’ll also need the kilowatt hour capacity of any solar, wind, geothermal, or fuel cell systems whose costs you’re claiming for the credit. Once you have all of that information gathered, Form 5695 basically fills out itself. All you need to do is copy certain costs to the form.
Then, it will instruct you on how to total them, and help you figure the amount of your credit. Remember, if you have any questions, don’t hesitate to contact a professional. A tax pro can make sure that you follow all pertinent laws while maximizing your take home amount.
Published or updated April 4, 2013.