How to Claim Credit for Energy Improvements
- 1). Make energy efficient improvements or invest in qualified energy property to qualify for the Nonbusiness Energy Property Credit. Energy efficiency improvements basically contribute to energy conservation, such as adding insulation materials or systems, exterior windows or doors and any metal roof with either pigmented coating or cooling granules. Qualified residential energy property costs include energy-efficient building property; qualified natural gas, propane, or oil furnaces or hot water boilers; and advanced main air circulating fans used in those furnaces. Note that these improvements must be made in your main home to qualify for the credit.
- 2). Obtain a copy of Form 5695, Residential Energy Credits, from the IRS or download the form from IRS.gov. (See Resources.) Form 5695 is the tax form used to claim energy credits. Check "Yes" to the question in Line 1 on the form if you made the qualifying improvements to your main home located in the U.S. If the answer is "No," you don't qualify for the credit.
- 3). Enter amounts spent on qualifying energy efficient improvements in the appropriate space in Lines 2a through 2d, and qualified energy property costs on Lines 3a through 3c. Do not include amounts paid for onsite preparations, assembly or original installation of the property.
- 4). Enter the sum of these amounts on Line 4. Enter 30 percent of this amount on Line 5. Your credit will be the smaller of this amount or $1,500. Enter this number on Line 7. Then enter on Line 8 the amount of tax you owe from Line 46 on Form 1040 or Line 43 on Form 1040NR. On Line 9, enter the sum of all your other tax credits, then subtract Line 9 from Line 8 and fill in that amount in Line 10. If that amount is less than zero, you can't claim the energy credit. On Line 11, enter the smaller of Line 7 or 10.
- 5). Qualify for the Residential Energy Efficient Property Credit by investing in qualified energy efficient property, such as solar water heaters, solar electricity equipment, fuel cell plants, qualified small wind energy property and qualified geothermal heat pump, in your existing or new main home. Second homes also qualify, but a rental property is generally excluded unless it is also a second home and is only rented out part of the year. If you meet this requirement, enter the amounts invested in Part II of Form 5695. Your credit is 30 percent of the sum of these amounts.
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