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Energy-Efficient Home Improvements Can Lower Your Taxes

Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

IRS Tax Tip 2014-47, April 3, 2014

You may be able to reduce your taxes if you made certain energy-efficient home improvements last year. Here are some key facts that you should know about home energy tax credits.

Non-Business Energy Property Credit  

  • This credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This includes items such as insulation, windows, doors and roofs.
     
  • You may also be able to claim the credit for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. 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.
     
  • This credit expired at the end of 2013. You may still claim the credit on your 2013 tax return if you didn’t reach the lifetime limit in prior years.

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 electric equipment and wind turbines.
     
  • There is no dollar limit on the credit for most types of property. 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.
     
  • This credit is available through 2016.

Use Form 5695, Residential Energy Credits, to claim these credits. For more on this topic refer to the form’s instructions. You can get it on IRS.gov or order it by mail by calling 800-TAX-FORM (800-829-3676).

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