Residential Energy Tax Credits

Posted by Adnan Hassan on August 14th, 2019

If you’re thinking about installing solar power, a solar water heater, a geothermal unit or fuel cells, now is probably a good time to claim residential energy tax credits. For residential energy-efficient properties, you could get tax credits valued at up to 30% of your costs, which can lead to a pretty big tax break.A more energy-efficient home helps your wallet and the planet over the long term, reducing your energy costs and potentially improving your home’s resale value.

Residential energy tax credits provides a credit valued at up to 30% of the cost of geothermal heat pumps for heating and cooling a home used as a residence, solar panels that generate electricity in a home used as a residence, solar-powered water heaters that perform at least half the home’s water heating in a U.S. home used as a residence, and wind turbines that generate energy for a home used as a residence.

While residential energy tax credits can be quite generous, there are strict rules and limitations for claiming them – and you need to make sure your home improvements qualify. These credits are available for a new-construction home (once you start living in it) as well as for improvements to an existing home. And, with the exception of the fuel cell credit, they’re available for both primary and secondary homes.

To claim your residential energy credits, you’ll need to fill out a Form 5695 and submit it with your tax return. This form requires you to provide information on the costs of your solar, wind or geothermal system. You’ll need to ensure the energy-efficient improvements meet IRS requirements to be eligible for the credit.

The instructions for Form 5695 provide details on the specific requirements for each type of improvement. As these instructions explain, you can claim the credit in the year when your fuel cells, solar system, wind system or geothermal units are installed. Or if you’re having a home built or reconstructed, you can claim the credit when you first begin using the home. It is important to note that the credit is nonrefundable.

The total amount of residential energy credits you receive can’t exceed the amount of tax due for the year in which you claim the credit. But if you don’t owe enough to claim your full credit, you can carry the unused amount over to the next tax year.

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Adnan Hassan

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Adnan Hassan
Joined: November 14th, 2017
Articles Posted: 29

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