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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.

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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:

  1. Any insulation material or system that is specifically designed to reduce the gain or loss of heat from your home
  2. Exterior windows, including some storm windows and skylights
  3. Exterior doors, including some storm doors
  4. 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.

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Author Bio

Total Articles: 1082
Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Article comments

PenelopeBall says:

There is a lot of detail about this is the McGraw Hill book,”Geothermal HVAC, Green Heating and Cooling”. Google “Geothermal Book”

In addition to the tax credits available through form 5695, there is section 179…Most people think the Section 179 Deduction is some arcane or complicated tax code. It really isn’t, as the following will show you.

Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. Government to encourage businesses to buy equipment and invest in themselves. It is sometimes referred to as the “SUV Tax Loophole” or the “Hummer Deduction” because many businesses have used this tax code to purchase qualifying vehicles (like SUV’s and Hummers.)

don paeth says:

How do I get instructions for form # 5695

patricia rogers says:

How do I get instructions for form #5695

stanley dowicki says:

please send form 5695 and instructions

Struggling with 5695 says:

This article doesn’t address the main issuse with form 5695. Line 11 and line 27 both instruct the taxpayer to input different(for most) amounts on the 1040. Line 11 is from part I and line 27 is from part II. Do we only use the line applicable to our own home upgrades, or must we fill out part II also if only part I applies to us? Thanks in advance….

patricia rogers says:

Send me instructions for form #5695

Carol Campbell says:

Please send form 5695 and instructions,thank you.

Janey McMahon says:

When filing our tax return, we were denied any tax credits for new windows we purchased in 2018. We spent $16,595 on 26 energy efficient new windows. Why can’t we get any tax credit?