Plan ahead for the 2014 tax season by knowing which home improvements qualify for energy tax credits. Home improvements that fall under the Non-business Energy Property Credit and the Residential Energy Efficient Property Credit can be applied towards certain energy property expenditures to help make energy-saving retrofits more affordable for homeowners.
1. Non-business Energy Property Credit
Homeowners can claim 10% of the price of eligible property (as listed below), excluding labor or installation costs.
- Qualified energy-efficiency improvements:
- Residential energy property expenditures (as listed below), including expenses for onsite labor costs such as preparation, assembly and original installation.
- Electric heat pumps.
- Central air conditioner.
- Natural gas, propane, or hot water boilers.
- Natural gas, propane, or oil furnaces.
- Advanced main air-circulating fan used in a natural gas, propane, or oil furnace.
- Biomass fuel stoves.
The Nonbusiness Energy Property Credit has a lifetime limit of $500 for all years after 2005, which can be broken down as follows:
- Windows: $200
- Any advanced main air circulating fan: $50
- Any qualified natural gas, propane for oil furnace, or hot water boiler: $150
- Any item of energy efficient building property, i.e., water heaters and heating and air conditioning systems: $300
If you have already taken a total of nonbusiness energy property credits exceeding $500 in previous years (after 2005), you are no longer eligible to use this credit for your 2013 tax return.
2. Residential Energy Efficient Property Credit
Homeowners can claim 30% of the cost of alternative energy equipment installed in or on their homes, as listed below:
- Solar electric property
- Solar water heating property
- Fuel cell property
- Small wind energy property
- Geothermal heat pump property
The Residential Energy Efficient Property Credit, which is valid until 2016, has no dollar limit for most types of property. If your credit exceeds the tax owed, you can carry the unused portion forward to next year’s tax return. One exception to this is fuel cell property, which is limited to $500 for each one-half kilowatt of capacity of the property.
To learn more about residential energy tax credits, contact a tax professional or your local IRS office.
- Energy Star – Federal Tax Credits for Consumer Energy Efficiency
- IRS - Get Credit for Making Your Home Energy Efficient or Buying Energy-Efficient Products
- Form 5695, Residential Energy Credits
Form 5695, Residential Energy Credits. Use this form to figure and take your
residential energy credits. Form 5695, Residential Energy Credits – Use this form to figure and take your residential energy credits. The residential energy credits are:
- The nonbusiness energy property credit, and
- The residential energy efficient property credit.
- Federal Tax Credits for Consumer Energy Efficiency
- RESNET – Cut Cost of Home Improvement with Energy Tax Credits
- Incentives and Resources (E-Conservation): http://energy.ces.ncsu.edu/incentives-rebates-and-programs/
- Energy Star-Federal Tax Credits for Energy Efficiency
- (Notice 2006-26) Guidance issued by Treasury Department and the IRS for certification of energy efficiency