Certain energy-efficient home improvements can cut your energy bills and save you money at tax time; however, most of these energy-related tax credits are scheduled to expire at the end of 2016. Below are some key facts that you should know about two different home energy tax credits.

Nonbusiness Energy Property Credit

  • Part of this credit is worth 10 percent of the cost of certain qualified energy-saving improvements to your main home. This may include items such as insulation, windows, doors and roofs.
  • The other part of the credit is the actual cost of certain property. This may include items such as advanced main air circulating fans, furnaces or hot water heaters. The credit amount for each type of property has a different dollar limit.
  • This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
  • Your main home must be located in the U.S. to qualify for the credit.
  • Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
  • Qualifying improvements to your principal residence must be completed by December 31, 2016.

Residential Energy Efficient Property Credit

  • This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
  • Qualified equipment includes solar hot water heaters, solar electricity equipment, fuel cell plants, small wind energy property and geothermal heat pumps.
  • To qualify for the credit in 2016, the property must be placed into service by December 31, 2016. For tax years after 2016, the credit will still be available only for solar hot water heaters and solar electricity equipment.
  • The tax credit for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity. The amount for other qualified expenditures does not have a limit. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
  • The home must be in the U.S. It does not have to be your main home, unless you are claiming a credit for a fuel cell plant.

Use Form 5695, Residential Energy Credits, to claim your home energy tax credits.


For more information about this topic please call our office.



Posted in