Did you know you can claim a federal tax credit for making your home more energy efficient? It’s a great tax credit, since going green is good for your budget anyway, but getting a tax credit on top of the existing benefits is great! IRS Form 5695 is used to claim the Residential Energy Credits. Here’s how.
There Are Two Types of Energy Credits to Claim on IRS Form 5695
There are Residential Energy Efficient Property credits and there are Nonbusiness Energy Property Credits. What’s the difference?
1. Residential Energy Efficient Property Tax Credits (30% of cost)
These are additions you make to your home to make it more energy efficient. Examples would be adding a solar fuel cell and solar panels. Another example is installing a new hot water boiler to heat your home, or a propane furnace that meets Energy Star qualifications.
You can use this type for existing and new homes, as well as second homes. Rentals don’t count. If you are applying for a tax credit for installing Fuel Cells, second homes don’t count for this type of improvement.
2. Nonbusiness Energy Property Credits (10% of cost)
These are improvements you make to your existing home’s structure to make it more energy efficient. A new roof, insulation, or if you install insulation, that’s part of this type of credit. Other examples would be new exterior doors or windows.
This is only available for existing homes, not new construction. Second homes and rentals don’t count. The Nonbusiness Energy Property Credits are for improvements made in 2012 and 2013. There is a lifetime limit on this one of $500.
The Energy Star Website
The federal government runs a program to help Americans decide what appliances and other home improvement items to buy, based on how energy efficient they are. Their national standardized rating sheets let you compare products to make the best choice. For example, by checking the Energy Star rating, you can choose the washing machine that uses the least amount of water per load.
Well the Energy Star website also helps you claim your Energy Tax Credits on IRS Form 5695, too. Not every product that’s qualified to have an Energy Star rating will give you a tax credit. Check this page on their website to see what you can include on IRS Form 5695.