The energy tax credit is designed for people who want to improve their homes to make them more energy-efficient.
One example of this may be installing solar panels to generate energy from the sun. Using renewable energy in your home could be a significant tax move for you.
Here’s everything you need to know to claim the residential energy tax credit and learn what it takes to qualify.
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Is the Residential Energy Tax Credit Still Available?
There’s a lot of misinformation regarding whether the residential energy tax credit is still available or not.
To put it simply, it’s still available in its entirety until 2032.
The law that Congress has passed under the Inflation Reduction Act increases the investment tax credit for home energy-efficient improvements to 30% from 26% and extends it through 2032.
After that, it will return to 26% in 2033 and 2034 before completely disappearing in 2035.
Energy Efficient Home Improvement credits
The tax credits apply to the following year following installation.
The Department of Energy states that the Residential Clean Energy Credit is designed for solar energy, wind energy, windows, doors, water heaters, heat pumps, and geothermal home improvements.
It would be best to keep in mind that these improvements only apply to your primary and second residences.
Fuel cell equipment works slightly differently because the credit only applies to your principal residence.
What is the Renewable Energy Tax Credit?
The renewable energy tax credit is for solar, geothermal, wind, home insulation, and other energy installments and improvements.
You will add up your various energy credits on IRS Form 5965. This includes the solar tax credit.
Like the Clean Energy Tax Credit, the amount you can get back is still 30%, until the tax credit expires after 2032.
Once you have added up all your energy credits on Form 5965, you’ll be able to add it to your conventional Form 1040.
Take note that there’s no upper ceiling for how much you can get back, but the credit for fuel cells is capped at $1,000 per kilowatt of power capacity.
Therefore, if you install fuel cells with a power capacity of six kilowatts, your tax credit will be worth $6,000.
How to Claim the Solar Energy Tax Credit
Due to the popularity of solar panels in many parts of the country, the IRS has a solar energy tax credit available for taxpayers who install them.
You need to prove to the IRS that you have had the work done. The solar tax credit refunds 30% of the cost of installing solar panels until 2032.
Keep all the receipts because the solar energy tax credit covers everything from shipping the solar panels to the actual installation costs.
You want to make sure you can prove your eligibility if you’re ever audited.
What is the Window Tax Credit?
Likewise, with appliances, energy credits for green windows have been changed. But, again, there are requirements regarding whether your windows qualify.
To begin with, they must meet Energy Star requirements to qualify for an energy-efficient window tax credit.
They also must have been installed in your own home, which also serves as your principal residence. So, your second home wouldn’t qualify.
You should make sure you have written certification to state when your windows were installed and the energy ratings of the windows.
So how much can you get back for your windows?
The credit is worth 30% of the cost of the windows. It’s capped at a $600 tax credit for windows that meet the requirements. On a side note, you can also get a $500 tax credit on doors.
What Appliances Qualify for the Credit?
The High-Efficiency Electric Home Rebate Program will assist American families in going green even if it is not a tax benefit.
The Inflation Reduction Act included the program, which offers rebates to low-and middle-income people who buy energy-efficient electric appliances.
Your family’s annual income must be less than 150% of the local median income for you to be eligible for a rebate.
How to Claim the Energy Tax Credit
You need to file Form 5695 alongside your tax return to claim the energy tax credit. Online tax filing software is more than capable of helping you do this.
All you need to do is state that you have made an energy improvement in your home, and the software will walk you through Form 5695 by asking you questions and requiring you to plug-in some numbers.
The platform will tell you whether you’re eligible for any of the credits. If you are, you will see at a glance how much you can claim back from the government.
Then you can find your W2 online and let the tax software import it for you and get started on claiming your energy tax credit.
The tax program will automatically send Form 5695 alongside your tax return. They guarantee 100% accuracy and give you access to professional tax preparers who will personally review your tax return.
Online tax filing makes it easy to claim your energy tax credits.