Please check out our article on IRS Form 5695, where we provide step-by-step guidance on how to complete this tax form. www.teachmepersonalfinance.com/irs-form-5695-instructions/ If you’re looking for tutorials for other IRS Forms that you can file directly through the IRS website, check out our free fillable forms page: www.teachmepersonalfinance.com/free-fillable-tax-forms/
I am building a house this year and making sure for new construction putting in geothermal would qualify. Watching the video is that correct... in my situation I would only be completing part 1 of the form. Initially when I was researching and was stepping through I got to part 2 and 17e and thought it wouldn't qualify.
This does present a question where the answer isn't clear in the form instructions. In this case, you would be eligible to claim the residential clean energy credit (30% of actual costs). You would only need to complete Part I. The uncertainty lies in whether the IRS allows this credit for newly constructed homes. However, in December 2022, the IRS came out with a fact sheet that clarifies this point and states that you can claim the residential clean energy credit for new homes: www.irs.gov/pub/taxpros/fs-2022-40.pdf
Hello! Great video! We bought a heat pump last year and were told by the company that it qualified for this credit. I'm using turbo tax and they have a field for 1) total cost of the heat pump, but 2) also have a field for "Any Fuel Cell Property Improvements" where I include the fuel cell property costs and the Killowatt capacity of fuel cell property. I entered the full amount paid in the total cost field. I'm not clear how that is different from the "fuel cell property cost". I know the outdoor unit is 18KW. What is the difference between the total cost and the fuel cell property improvements?
For property that isn't fuel-cell driven, you can claim a credit for up to 30% of the costs, including installation. For fuel cell properties, there is a cap of $500 per 1/2 kilowatt of capacity.
If Line 26 were zero, you would still need to add the total of Lines 18b, 19e, 20b, 22b, 23b, 24b, 25b. However, for Line 28, you'd take the lower of Line 27 or $1,200.
i'm so confused but i loved your you tube video. I was talked into get several things done because they said i could get a good tax refund, but this form is very confusing. I had a solar fan installed, installation blown in, radiant barrier installed, and new roof. They talked me into the new roof because with everything else they said i could deduct it too. Any help would be appreciated.
I would take this step by step: Solar fan: Don't know if that will qualify. Insulation: Probably deductible under "Qualified energy efficiency improvements" Radiant barrier: I'm not sure, but possibly under "Qualified energy efficiency improvements." Roof: Probably won't be deductible unless there are solar shingles or solar equipment installed in conjunction with the roof installation. I definitely would advise going over this with a tax professional to make sure you're properly reporting credits (and that you're not missing out on any that you're entitled to).
yes, you should enter in insulation, labor and any audits you paid, probably everything minus the roof part. i5695 says "any insulation material or air sealing material or system." Almost all insulation from pros or Home improvements stores meets the IECC certification. I would lean towards entering the solar fan and barrier and seeing if IRS accepts it. i5695, also say include "The amount paid or incurred....". The New roof part may have unfortunately been removed from 5695, unless it structurally is part of the solar fan system (which is probably inside your attic, powered by a solar panel on the roof?) " In general, traditional roofing materials and structural components do not qualify for the Residential Clean Energy Property Credit because they primarily serve a roofing or structural function." www.irs.gov/credits-deductions/frequently-asked-questions-about-energy-efficient-home-improvements-and-residential-clean-energy-property-credits-energy-efficiency-requirements then this link, links to a Factsheet. I propose, enter everything minus the roof costs, or maybe some portion of the roof that supports any efficiency improvements. Radiant barrier, (is that the wrap that goes under the roof shingles? Is it an energy efficient improvement or a roof item, that is a very good question.
However, some solar roofing tiles and solar roofing shingles serve as solar electric collectors while also performing the function of traditional roofing, serving both the functions of solar electric generation and structural support and such items qualify for the credit. --- reference www.irs.gov/pub/taxpros/fs-2022-40.pdf I suggest print out 2 copies of 5695 and just do them yourself being very cautious (just entering all insulation and that % of labor) and the other trial entering almost all your home improvement costs. then you'll know the max and min tax credit, before going into a tax professional.
I would calculate the credit that you're eligible for regarding the HVAC. After that, I think your options are limited. If this is a Home Depot loan, and *is not secured by your home* (i.e. like a home mortgage or a home equity line of credit), then it doesn't count as a qualified home mortgage. Therefore, you can't deduct the interest on the loan on Schedule A.
@@teachmepersonalfinance Thank you. I did get a heat pump installed and its energy star efficient. I hear you can get a full rebate if you make less that 80% of median household income.
@@teachmepersonalfinance So if my numbers are correct, I qualify for a credit of 2600. 2000 for the unit heat pump and 600 just for the central ac. What should I write under costs? the loan itself is 25K.
@@pierre0227 You should write in the cost of the HVAC system. If you *only* took the loan to cover the cost of the HVAC system, then you could use that. However, if you used part of the loan proceeds for something else, then stick to the cost of the HVAC system only.
@@teachmepersonalfinance ok thanks. I know the unit and condenser was half the price of the loan. The other half was just insulation, new flex and grills. Plus labor.
Can you still use the carry over residential credit for 2023 even if you sold the home in 2022? There was not enough tax liability when we filed in 2022 so when I’m filing for 2023, I see that there’s a carry over. Wanted to make sure because we have put out a large amount for the installation and wanted to get it back.
@@crystalwhite2416 The instructions are vague, and don't seem to address this. You should at least attach all pages with information on them. So if you only completed Part I, I don't think that you need to submit a blank Part II...I just don't have a reference to cite.
are these credits considered non-refundable credits? In other words, if I'm getting a tax refund, the credit will not be added to my refund? I would only get the credit if I owed taxes? Thus, I would have to save it to use on future tax returns where I might owe taxes?
Both tax credits are nonrefundable. Here are links to the IRS website about both the Residential Clean Energy credit and the Energy Efficient Home Improvement credit. www.irs.gov/credits-deductions/residential-clean-energy-credit www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
@@teachmepersonalfinance Thanks! I also see this note in the fact sheet - "Q4. May a taxpayer carry forward unused credits to another tax year? (added December 22, 2022) A4. The rules vary by credit. • Under the Energy Efficient Home Improvement Credit: a taxpayer may not carry the credit forward. Thus, if a taxpayer does not have sufficient tax liability to claim all or a portion of the credit in the year in which the related property for which the qualifying expenditure is placed in service, the unused amount of the credit may never be claimed." Since I normally get a refund on my taxes, the credit is worthless in my particular case.
@@MarkHolmes 5695 has 2 parts, that correspond to different names, "Residential Clean Energy Credit" and the 2nd part is "Energy Efficient Home Improvement Credit", If I'm reading this right, (I think IRS updated i5695 again in Jan 2024), the 1st part can be carried until 2033. So, supplies, labor and audits within the Residential Clean Energy Credit part can be carried forward. I kept getting stuck on line 14, where the worksheet asks for 5695-line 32, when I'm still on 5695-line14. I'm still trying to figure out why or where 1040-line18 comes from, mine was zero, or which step cancelled my 30% of 500 spent on insulation (I think this goes in the 2nd part which can't be carried forward). I like to prove to myself that it is a non-refundable credit, but I couldn't ever find it. But in these helpful videos, the 2nd part can be entered into your taxes every year. There is no more LIFETIME limit for part 2. In 2022 there was a lifetime limit.
I installed a mini split air conditioner unit ( high efficiency) , does it qualify for move improvement for claiming the tax credit? if so , what line in the form should be used for this? thanks
The IRS Form 5695 instructions only refer to central air conditioning units. If this doesn't count, then you might be able to look at whether this constitutes a heat pump. The instructions state the specifications for a qualifying heat pump, so you should be able to determine whether your unit qualifies.
I would say that tou need to discuss this with your accountant, then give your accountant the inofrmation that he or she needa to make a determination.
Is qualified fuel cell property something other than just solar panels? All I've installed are solar panels. Also, my water heater is electric, but I wouldn't know how much of its power comes from the panels.
The IRS considers qualified fuel cell property to be different from solar panels. The credit for solar panels is 30% of the total installation costs, while the credit for qualified fuel cell property is a maximum of $500 per 1/2 kilowatt of capacity for the property.
I was led to believe that replacing a propane stove with an induction stove was eligible for a tax credit. I can't find anything on Form 5695 that mentions induction stoves.
I believe your second statement is correct. I cannot find anything that would give a tax credit for induction stoves. The only stoves that I see in the instructions are biomass stoves, which I don't think are the same thing.
Scenario I can't seem to get a straight answer to: (your video has been VERY informative, but I still have a question) (numbers are rounded for ease) Say I made 100,000 dollars this year. I am in 22% tax bracket, so my tax is 22k. However, since my payroll deductions throughout the year totaled 23,000, I am due a 1,000 tax return (rebate). But, assume I purchased 18,000 worth of a solar system. 30% of 18k is 5,400, which as I understand would make my new tax due 16,600 (22,000-5,400) As I understand it, I don't get the money (23,000-16,600 = 6,400) returned to me, It would be credited to next years tax, correct? If this is the case, I would be in the same situation next year, as payroll deductions are set to cover the anticipated tax due. How would I ever get my rebate? Would I have to (is it legal) to adjust my next years deductions so that the end of year contributions total around 16,000 instead of the regular 22,000? Thank you.
Duane, A couple of good questions..I’ll try to address the ones that I see, but please feel free with any follow ups. 1. I am in the 22% tax bracket, so my tax is $22k. I’d be very careful with this assumption. You’re in the 22% MARGINAL tax bracket, but your AVERAGE tax rate will be lower. You progress through the 10% tax bracket and the 12% tax brackets, THEN you’re paying 22% of each dollar you earn when you jump from 12% to 22%. So starting off, your tax bill is lower than you first thought. 2. If I choose not to have my refund issued to me, it would be credited to next year’s tax return. This is correct. You can find the exact amount at the bottom of your previous year tax return. 3. Can I make adjustments to my withholding? Absolutely. You can, and should, keep an eye on your withholding during the year. You would make adjustments on your employer’s W-4 (if you are an employee). I would recommend that you use your pay statement as a baseline so you can determine what adjustments you might need to make. I hope this helps, but please ask any follow up questions.
@@teachmepersonalfinance Thank you for the timely reply. I really appreciate it Just to clarify, I was just using 22% to establish a number to ask the question about the refund. Perhaps I did not make that clear. I am just trying to figure out how the solar credit gets paid. If I am due a 1,000 refund normally, and as stated above, qualify for 5,400 solar credit, am I now entitled to a 6,400 refund? I would never "choose" to have the excess carried over to next year, I was under the impression this was required, Thanks again, Duane
@@brooksncc , I understand. I believe you’re still trying to address two points. 1. If your tax situation would’ve otherwise warranted a $1,000 refund, but you are able to claim a $5,400 solar tax credit, then would you be entitled to a credit of $6,400? The answer is yes, with one caveat. The Energy Efficient Home Improvement credit is a NON-refundable tax credit. This means that your credits can reduce your tax bill to zero, but you cannot get a refund beyond that. So if your tax liability for the year is $5,000, then the tax credit is limited to the amount that reduces your tax bill to zero. However, any excess credit is lost…you can’t defer it to future years or use it to amend a previous years return. My first thought is that it seems you don’t have to worry about this situation, but it’s worth keeping in mind. 2. When you’re expecting a tax refund, you always have full control over whether to receive a full refund, apply it to next year’s tax bill, or a combination of both. The only exception would be if you owe certain debts that are enforceable by a federal or state agency. Examples might include things such as back taxes, delinquent child support, overpaid Social Security benefits, or overpaid worker’s compensation. Even then, there’s a formal process by which these debts are reported to the Treasury Department, which then turns them over to the IRS for collection action, which authorizes the IRS to garnish refunds to pay delinquent debts.
Please forgive my ignorance, but I'm super new to all this. The total cost of the project would be the target principle of my loan (utilized to purchase my panels) and not my projected outstanding principle? Or the other way around?
The total cost of the project would be the total amount of money that was spent on your residential energy upgrades. To the IRS, whether or not you took a loan out is irrelevant. If you took out a loan, and if 100% of that loan was used to purchase your panels, then you probably would use the loan amount, minus financing costs, on this tax form. I would make sure that all of your receipt documentation can clearly articulate the cost of the project that you enter on Form 5695, not just the loan, which may or may not contain additional unrelated to the tax credit.
@@teachmepersonalfinance I have this same question and am also new to this. My contract states that I will own my panels, which are financed through the solar company. I'm just not sure what number to put in that box (#1).
I had a new 16 SEER AC system installed in my home in 2023 for $9350.00. Am I correct in listing the $9350.00 cost in Line 22a resulting in a $600.00 credit on IRS1040SR . I understand I have to complete Form5695 Part II Sections A and Section B . Is this correct ?
First and foremost , THANK YOU for your military service. Lest We Forget - we are here today enjoying our beloved country because of the unselfish bravery of the USA military. THANK YOU and GOD Bless You. Special thanks for your quick response per my Form 5695 . I am now ready to file our 1040SR !!
@@bobteriaguzzi8851 Thank you very much. That means a lot to me. Please feel free to share with any friends or family that might benefit from these walkthroughs.
I install an Air condition heat pump out side and an Air handler inside the house in 2023 how much credit I will get and where should this entered on 5695
You may be eligible for a credit of up to $2,000 for a heat pump, or $600 for an air conditioner. You would need to look further in the form instructions based on your system's specifications to see which credit you would qualify for. You would enter heat pump costs (if that's what it is) on Line 29a. Air conditioner costs would go on Line 22a.
Form 5695 Line 10. How is this number calculated - Kilowatt Capacity of Property? Where is that number got? How come the number of panels isn't included?
This would be information that the manufacturer provides, in terms of rating. You should be able to find it in your paperwork for the installation, or you should be able to ask the company that did the installation. I imagine that the number of panels isn't included in the instructions because the tax credit for fuel cell properties is either 30% of the total installation costs, or $1,000 times the kilowatt capacity, whichever is . The number of panels is irrelevant for either calculation.
For the 2022 tax year, you should be able to use Part I to calculate the tax credit for installing solar panels. You should not need to complete Part II.
I can’t find the Energy Efficient Home Improvement Credit Limit worksheet. Is it the same one used for line 14? The instructions stop at line 29. Also for line 14, does it mean i need to first fill out form 1040?
The Energy Efficient Home Improvement Credit Limit worksheet is different from the one used for Line 14. The Residential Clean Energy Credit Limit Worksheet, for Line 14, is on Page 4 of the form instructions. The Energy Efficient Home Improvement Credit Limit, or Line 29 worksheet, is on page 7 of the form instructions: www.irs.gov/pub/irs-pdf/i5695.pdf Since this is a nonrefundable tax credit, you usually will have to complete Form 1040, then determine how much of tax credit you can apply to your remaining tax liability. However, you cannot reduce your tax bill below zero, and you cannot carry forward any unused credits to a future tax year.
Hi, my solar roof installation was completed in 2023, Tasha sent me a statement, but I have not paid yet, most likely will happen in 2024. Can I still claim the credit in 2023？ thanks.
The IRS form instructions state: "Costs are treated as being paid when the original installation of the item is completed..." In this situation, it appears that the IRS would consider you eligible for the credit in 2023 if the work was completed in 2023, even if you don't actually pay the invoice until 2024.
For taxpayers who installed a boiler in 2022, you would enter the cost in Line 22a or Line 22b, depending on thermal efficiency. If you to install an oil boiler, then you would have to wait to see if the tax form changes for the 2023 tax year (or 2024 tax year, depending on when you install).
Can I purchase a 30k home solar system with a 30k traditional ira and use the 30% tax credit to offset the tax liability generated when removing the money from the ira ?
Hi Michael! You can withdraw money from a traditional IRA to purchase a home solar system. However, without knowing more about your tax situation, I'm not sure whether this would be the most advisable option for you. Here are some things that I would consider in this decision: 1. What is your marginal tax bracket? Receiving a $9,000 tax credit might offset your additional tax bill if you're in the 12% tax bracket, but not if you're in the 32% bracket or higher. 2. Are you subject to an early withdrawal penalty? 3. Do you have other tax credits that might impact the credits from your solar system? I would also consider whether you have other sources of funds that you can use, while allowing you to keep money growing on a tax-deferred basis in your IRA.
Thank-you for answering my question. I am 69 years old so I don’t believe there would be an early withdrawal penalty .I am in the 12% tax bracket category so I believe using the Ira would probably be a good route to go. We are not risky investors, my feeling is we would save approx $ 140. a month on our electric bill and add equity to our home. I realize everyone’s situation would be different,your reply help me and probably others to confirm what I thought would be expectable under tax law. Any further comments would be appreciated. Thanks Again.
Hi. Thanks for your video. Wondering if you could help me. We bought 2 heat pumps in 2021, and we received a $300 credit on our tax return. Because we had 2 heat pumps installed in our home, were we supposed to get two sets of credits? $300 credit per heat pump for a total of $600 in tax credits? Not sure if we need to amend our tax return if that's the case and if it's worth it. Thank you for any help.
Hi D, Thank you for writing! Looking at the IRS Form instructions for 2021, it seems that heat pumps appear in two categories: geothermal heat pumps or electric heat pump water heaters & electric heat pumps. Since I'm not sure which you are referring two, I'll outline what I see in the form instructions: Geothermal heat pumps: In 2021, taxpayers could take a tax credit equal to 26% of the total costs (including labor and installation), with no limit. Electric heat pump water heaters & electric heat pumps: In 2021, taxpayers could include the cost of either (or both) of these on Line 22a, Energy-efficient building property, up to $300. But I could find no distinction in the IRS instructions, the federal government's Energy Star website, or within any other guidance that allows you to take double the credits for two pumps. Furthermore, this falls in the category of Nonbusiness Energy Property Credit, which is subject to a lifetime limit of $500. Given this, I'm not sure whether the additional credit is worth amending your return. If using a paid tax preparer, you might be able to get a better indication on whether you can file an amended return. If using your own tax preparation software, you can play around to see if the software will let you change the entry. If not, I'm not sure it's worth trying to amend your return.
@@teachmepersonalfinance hi. Thank you so much for your response. I even called the IRS to ask this question, but they couldn't help me. Lol. Oh and it's 2 regular electric heat pumps we installed at our house. I did have a tax preparer do my 2021 taxes for me and his fees were very expensive. If I decide to amend it myself, I'm not sure what to do. Would I have to just amend Form 5695 only and send that in or do the whole tax return over again? Like you said, I'm not sure if it's worth amending. We already paid what we owed for our 2021 federal and state taxes. Would we get that leftover $200 credit from the $500 lifetime credit in result of amending? Thank you again for your help!
I would probably just call the person who prepared your tax return. When you ask him whether you can take the additional credit, he should be able to answer. I imagine that the potential refund might not be worth the cost of filing the amended return, but he should be able to tell you that.
You may be able to claim a 30% credit on certain windows, up to a maximum of $1,200, as part of the energy efficient home improvement credit (Part II).
Purchasing indoor outdoor AC unit (package). Manufacturer says it is eligible for tax credit on form 5695. I don’t see where I am supposed to enter the amount ( 30% of cost not to exceed $600). Any guidance appreciated.
For the 2022 tax year, the maximum tax credit for an AC system is $300 (30% of total cost), and you would enter this in Line 22a. If you placed the AC unit into service in 2023, then you would be eligible for a tax credit of 30% of cost, NTE $600. The 2023 version of the form hasn't been released yet, so it's hard to say whether you would put it in the same line. However, you can probably expect to enter the costs under .
If this is for a project that took place in 2022 or earlier, you can take a tax credit of 10% (up to a maximum of $500) for a qualifying roof, regardless of whether or not you installed solar panels. If the roof project is taking place in 2023 or later, you cannot take a credit for the roof, unless the roof consists of solar roofing tiles or solar roofing shingles.
@@teachmepersonalfinance the project started at 2021, I asked Tesla to install solar panel. They inspected the roof but it’s in a bad condition. We have to replace the roof at the end of 2021, the solar panel was installed mid 2022.
According to the IRS form instructions, "For purposes of both credits, costs are treated as being paid when the original installation of the item is completed." For a roof that was completed in 2021, you probably would need to include those costs for your 2021 tax return. Since your solar panel was installed in 2022, you would take the credits in your 2022 tax return. Below are the Energy Star qualifications for a metal or asphalt roof that was installed in 2022 or earlier. Roofs (Metal & Asphalt) **Note: ENERGY STAR certification for roof products was withdrawn effective 6/1/22. This tax credit is for ENERGY STAR certified metal and asphalt roofs with pigmented coatings or cooling granules designed to reduce heat gain. Certified roof products reflect more of the sun's rays, which can lower roof surface temperature by up to 100F, decreasing the amount of heat transferred into your home. Tax Credit Amount: 10% of the cost, up to $500 (NOT INCLUDING INSTALLATION) Requirements "Metal roofs with appropriate pigmented coatings" and "asphalt roofs with appropriate cooling granules" that also meet ENERGY STAR requirements. NOTE: Tax Credit does NOT include installation costs.
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Please check out our article on IRS Form 5695, where we provide step-by-step guidance on how to complete this tax form. www.teachmepersonalfinance.com/irs-form-5695-instructions/
If you’re looking for tutorials for other IRS Forms that you can file directly through the IRS website, check out our free fillable forms page: www.teachmepersonalfinance.com/free-fillable-tax-forms/
I am building a house this year and making sure for new construction putting in geothermal would qualify. Watching the video is that correct... in my situation I would only be completing part 1 of the form. Initially when I was researching and was stepping through I got to part 2 and 17e and thought it wouldn't qualify.
This does present a question where the answer isn't clear in the form instructions. In this case, you would be eligible to claim the residential clean energy credit (30% of actual costs). You would only need to complete Part I.
The uncertainty lies in whether the IRS allows this credit for newly constructed homes. However, in December 2022, the IRS came out with a fact sheet that clarifies this point and states that you can claim the residential clean energy credit for new homes: www.irs.gov/pub/taxpros/fs-2022-40.pdf
Hello! Great video! We bought a heat pump last year and were told by the company that it qualified for this credit. I'm using turbo tax and they have a field for 1) total cost of the heat pump, but 2) also have a field for "Any Fuel Cell Property Improvements" where I include the fuel cell property costs and the Killowatt capacity of fuel cell property. I entered the full amount paid in the total cost field. I'm not clear how that is different from the "fuel cell property cost". I know the outdoor unit is 18KW. What is the difference between the total cost and the fuel cell property improvements?
For property that isn't fuel-cell driven, you can claim a credit for up to 30% of the costs, including installation. For fuel cell properties, there is a cap of $500 per 1/2 kilowatt of capacity.
For number 27, if you don't have any in line 26, would that make line 27 a zero or 500?
If Line 26 were zero, you would still need to add the total of Lines 18b, 19e, 20b, 22b, 23b, 24b, 25b.
However, for Line 28, you'd take the lower of Line 27 or $1,200.
i'm so confused but i loved your you tube video. I was talked into get several things done because they said i could get a good tax refund, but this form is very confusing. I had a solar fan installed, installation blown in, radiant barrier installed, and new roof. They talked me into the new roof because with everything else they said i could deduct it too. Any help would be appreciated.
I would take this step by step:
Solar fan: Don't know if that will qualify.
Insulation: Probably deductible under "Qualified energy efficiency improvements"
Radiant barrier: I'm not sure, but possibly under "Qualified energy efficiency improvements."
Roof: Probably won't be deductible unless there are solar shingles or solar equipment installed in conjunction with the roof installation.
I definitely would advise going over this with a tax professional to make sure you're properly reporting credits (and that you're not missing out on any that you're entitled to).
yes, you should enter in insulation, labor and any audits you paid, probably everything minus the roof part. i5695 says "any insulation material or air sealing material or system." Almost all insulation from pros or Home improvements stores meets the IECC certification. I would lean towards entering the solar fan and barrier and seeing if IRS accepts it. i5695, also say include "The amount paid or incurred....". The New roof part may have unfortunately been removed from 5695, unless it structurally is part of the solar fan system (which is probably inside your attic, powered by a solar panel on the roof?) " In general, traditional roofing materials and structural components do not qualify for the Residential Clean Energy Property Credit because they primarily serve a roofing or structural function." www.irs.gov/credits-deductions/frequently-asked-questions-about-energy-efficient-home-improvements-and-residential-clean-energy-property-credits-energy-efficiency-requirements then this link, links to a Factsheet. I propose, enter everything minus the roof costs, or maybe some portion of the roof that supports any efficiency improvements. Radiant barrier, (is that the wrap that goes under the roof shingles? Is it an energy efficient improvement or a roof item, that is a very good question.
However, some solar roofing tiles and solar roofing shingles serve as solar electric collectors while also performing the function of traditional roofing, serving both the functions of solar electric generation and structural support and such items qualify for the credit. --- reference www.irs.gov/pub/taxpros/fs-2022-40.pdf I suggest print out 2 copies of 5695 and just do them yourself being very cautious (just entering all insulation and that % of labor) and the other trial entering almost all your home improvement costs. then you'll know the max and min tax credit, before going into a tax professional.
I might need my costs to be itemized. I took out a Home Depot loan to change my whole HVAC system. What do you recommend?
I would calculate the credit that you're eligible for regarding the HVAC. After that, I think your options are limited.
If this is a Home Depot loan, and *is not secured by your home* (i.e. like a home mortgage or a home equity line of credit), then it doesn't count as a qualified home mortgage. Therefore, you can't deduct the interest on the loan on Schedule A.
@@teachmepersonalfinance Thank you. I did get a heat pump installed and its energy star efficient. I hear you can get a full rebate if you make less that 80% of median household income.
@@teachmepersonalfinance So if my numbers are correct, I qualify for a credit of 2600. 2000 for the unit heat pump and 600 just for the central ac. What should I write under costs? the loan itself is 25K.
@@pierre0227 You should write in the cost of the HVAC system. If you *only* took the loan to cover the cost of the HVAC system, then you could use that. However, if you used part of the loan proceeds for something else, then stick to the cost of the HVAC system only.
@@teachmepersonalfinance ok thanks. I know the unit and condenser was half the price of the loan. The other half was just insulation, new flex and grills. Plus labor.
Can you still use the carry over residential credit for 2023 even if you sold the home in 2022? There was not enough tax liability when we filed in 2022 so when I’m filing for 2023, I see that there’s a carry over. Wanted to make sure because we have put out a large amount for the installation and wanted to get it back.
When filling out just for solar panel you just fillout part 1 correct?
This is correct.
@@teachmepersonalfinance do we still have to submit all pages or just the first page?
@@crystalwhite2416 The instructions are vague, and don't seem to address this. You should at least attach all pages with information on them. So if you only completed Part I, I don't think that you need to submit a blank Part II...I just don't have a reference to cite.
are these credits considered non-refundable credits? In other words, if I'm getting a tax refund, the credit will not be added to my refund? I would only get the credit if I owed taxes? Thus, I would have to save it to use on future tax returns where I might owe taxes?
Both tax credits are nonrefundable. Here are links to the IRS website about both the Residential Clean Energy credit and the Energy Efficient Home Improvement credit.
www.irs.gov/credits-deductions/residential-clean-energy-credit
www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit
@@teachmepersonalfinance Thanks! I also see this note in the fact sheet - "Q4. May a taxpayer carry forward unused credits to another tax year? (added December 22, 2022)
A4. The rules vary by credit.
• Under the Energy Efficient Home Improvement Credit: a taxpayer may not carry the credit forward. Thus, if a
taxpayer does not have sufficient tax liability to claim all or a portion of the credit in the year in which the
related property for which the qualifying expenditure is placed in service, the unused amount of the credit may
never be claimed." Since I normally get a refund on my taxes, the credit is worthless in my particular case.
@@MarkHolmes 5695 has 2 parts, that correspond to different names, "Residential Clean Energy Credit" and the 2nd part is "Energy Efficient Home Improvement
Credit", If I'm reading this right, (I think IRS updated i5695 again in Jan 2024), the 1st part can be carried until 2033. So, supplies, labor and audits within the Residential Clean Energy Credit part can be carried forward. I kept getting stuck on line 14, where the worksheet asks for 5695-line 32, when I'm still on 5695-line14. I'm still trying to figure out why or where 1040-line18 comes from, mine was zero, or which step cancelled my 30% of 500 spent on insulation (I think this goes in the 2nd part which can't be carried forward). I like to prove to myself that it is a non-refundable credit, but I couldn't ever find it. But in these helpful videos, the 2nd part can be entered into your taxes every year. There is no more LIFETIME limit for part 2. In 2022 there was a lifetime limit.
@@MarkHolmes thanks for this, asking the right questions haha
I installed a mini split air conditioner unit ( high efficiency) , does it qualify for move improvement for claiming the tax credit? if so , what line in the form should be used for this? thanks
The IRS Form 5695 instructions only refer to central air conditioning units. If this doesn't count, then you might be able to look at whether this constitutes a heat pump. The instructions state the specifications for a qualifying heat pump, so you should be able to determine whether your unit qualifies.
@@teachmepersonalfinance Ok for the response. Yes, a mini split is a type of heat pump, but i know that , would my accountant would know? thanks
I would say that tou need to discuss this with your accountant, then give your accountant the inofrmation that he or she needa to make a determination.
@@teachmepersonalfinance many thanks!!
Can I get a credit for a solar clothes dryer?
can you use carry over credit for past delinquent tax? If so is there a form?
I'm not sure that I understand your question. Are you asking whether or not you can take a tax credit for delinquent taxes that you later paid off?
Is qualified fuel cell property something other than just solar panels? All I've installed are solar panels. Also, my water heater is electric, but I wouldn't know how much of its power comes from the panels.
The IRS considers qualified fuel cell property to be different from solar panels. The credit for solar panels is 30% of the total installation costs, while the credit for qualified fuel cell property is a maximum of $500 per 1/2 kilowatt of capacity for the property.
I was led to believe that replacing a propane stove with an induction stove was eligible for a tax credit. I can't find anything on Form 5695 that mentions induction stoves.
I believe your second statement is correct. I cannot find anything that would give a tax credit for induction stoves. The only stoves that I see in the instructions are biomass stoves, which I don't think are the same thing.
Scenario I can't seem to get a straight answer to: (your video has been VERY informative, but I still have a question)
(numbers are rounded for ease)
Say I made 100,000 dollars this year. I am in 22% tax bracket, so my tax is 22k. However, since my payroll deductions throughout the year totaled 23,000, I am due a 1,000 tax return (rebate).
But, assume I purchased 18,000 worth of a solar system. 30% of 18k is 5,400, which as I understand would make my new tax due 16,600 (22,000-5,400)
As I understand it, I don't get the money (23,000-16,600 = 6,400) returned to me, It would be credited to next years tax, correct?
If this is the case, I would be in the same situation next year, as payroll deductions are set to cover the anticipated tax due. How would I ever get my rebate? Would I have to (is it legal) to adjust my next years deductions so that the end of year contributions total around 16,000 instead of the regular 22,000?
Thank you.
Duane,
A couple of good questions..I’ll try to address the ones that I see, but please feel free with any follow ups.
1. I am in the 22% tax bracket, so my tax is $22k.
I’d be very careful with this assumption. You’re in the 22% MARGINAL tax bracket, but your AVERAGE tax rate will be lower. You progress through the 10% tax bracket and the 12% tax brackets, THEN you’re paying 22% of each dollar you earn when you jump from 12% to 22%.
So starting off, your tax bill is lower than you first thought.
2. If I choose not to have my refund issued to me, it would be credited to next year’s tax return.
This is correct. You can find the exact amount at the bottom of your previous year tax return.
3. Can I make adjustments to my withholding?
Absolutely. You can, and should, keep an eye on your withholding during the year. You would make adjustments on your employer’s W-4 (if you are an employee). I would recommend that you use your pay statement as a baseline so you can determine what adjustments you might need to make.
I hope this helps, but please ask any follow up questions.
@@teachmepersonalfinance Thank you for the timely reply. I really appreciate it Just to clarify, I was just using 22% to establish a number to ask the question about the refund. Perhaps I did not make that clear. I am just trying to figure out how the solar credit gets paid.
If I am due a 1,000 refund normally, and as stated above, qualify for 5,400 solar credit, am I now entitled to a 6,400 refund? I would never "choose" to have the excess carried over to next year, I was under the impression this was required,
Thanks again, Duane
@@brooksncc , I understand. I believe you’re still trying to address two points.
1. If your tax situation would’ve otherwise warranted a $1,000 refund, but you are able to claim a $5,400 solar tax credit, then would you be entitled to a credit of $6,400? The answer is yes, with one caveat.
The Energy Efficient Home Improvement credit is a NON-refundable tax credit. This means that your credits can reduce your tax bill to zero, but you cannot get a refund beyond that. So if your tax liability for the year is $5,000, then the tax credit is limited to the amount that reduces your tax bill to zero. However, any excess credit is lost…you can’t defer it to future years or use it to amend a previous years return. My first thought is that it seems you don’t have to worry about this situation, but it’s worth keeping in mind.
2. When you’re expecting a tax refund, you always have full control over whether to receive a full refund, apply it to next year’s tax bill, or a combination of both. The only exception would be if you owe certain debts that are enforceable by a federal or state agency. Examples might include things such as back taxes, delinquent child support, overpaid Social Security benefits, or overpaid worker’s compensation. Even then, there’s a formal process by which these debts are reported to the Treasury Department, which then turns them over to the IRS for collection action, which authorizes the IRS to garnish refunds to pay delinquent debts.
@@teachmepersonalfinance Thank you once again for the quick reply. I appreciate it
Please forgive my ignorance, but I'm super new to all this.
The total cost of the project would be the target principle of my loan (utilized to purchase my panels) and not my projected outstanding principle? Or the other way around?
The total cost of the project would be the total amount of money that was spent on your residential energy upgrades. To the IRS, whether or not you took a loan out is irrelevant.
If you took out a loan, and if 100% of that loan was used to purchase your panels, then you probably would use the loan amount, minus financing costs, on this tax form. I would make sure that all of your receipt documentation can clearly articulate the cost of the project that you enter on Form 5695, not just the loan, which may or may not contain additional unrelated to the tax credit.
@@teachmepersonalfinance I have this same question and am also new to this. My contract states that I will own my panels, which are financed through the solar company. I'm just not sure what number to put in that box (#1).
@@level_ken5231 You would put the amount that you paid for the solar panels, without respect to financing.
If I didn’t file for my tax credit in 2022 can I still claim it on my 2023 taxes?
No. But you can file an amended tax return on IRS Form 1040-X and claim it against your 2022 taxes.
I had a new 16 SEER AC system installed in my home in 2023 for $9350.00.
Am I correct in listing the $9350.00 cost in Line 22a resulting in a $600.00 credit on IRS1040SR . I understand I have to complete Form5695 Part II Sections A and Section B .
Is this correct ?
You're correct except for one detail. If you don't have anything that qualifies as an expense in Section A, then you don't need to complete Section A.
First and foremost , THANK YOU for your military service. Lest We Forget - we are here today enjoying our beloved country because of the unselfish bravery of the USA military. THANK YOU and GOD Bless You.
Special thanks for your quick response per my Form 5695 . I am now ready to file our 1040SR !!
@@bobteriaguzzi8851 Thank you very much. That means a lot to me. Please feel free to share with any friends or family that might benefit from these walkthroughs.
I install an Air condition heat pump out side and an Air handler inside the house in 2023 how much credit I will get and where should this entered on 5695
You may be eligible for a credit of up to $2,000 for a heat pump, or $600 for an air conditioner. You would need to look further in the form instructions based on your system's specifications to see which credit you would qualify for. You would enter heat pump costs (if that's what it is) on Line 29a. Air conditioner costs would go on Line 22a.
Form 5695 Line 10. How is this number calculated - Kilowatt Capacity of Property? Where is that number got? How come the number of panels isn't included?
This would be information that the manufacturer provides, in terms of rating. You should be able to find it in your paperwork for the installation, or you should be able to ask the company that did the installation.
I imagine that the number of panels isn't included in the instructions because the tax credit for fuel cell properties is either 30% of the total installation costs, or $1,000 times the kilowatt capacity, whichever is . The number of panels is irrelevant for either calculation.
So in the first line I have to put the total cost of the solar panels?
Yes. You would enter the total cost of the solar panels in Line 1.
@@teachmepersonalfinance is that the total cost plus financing?
I just got solar panels installed with no other energy efficient home improvements, do you need to complete part II?
For the 2022 tax year, you should be able to use Part I to calculate the tax credit for installing solar panels. You should not need to complete Part II.
I can’t find the Energy Efficient Home Improvement Credit Limit worksheet. Is it the same one used for line 14? The instructions stop at line 29. Also for line 14, does it mean i need to first fill out form 1040?
The Energy Efficient Home Improvement Credit Limit worksheet is different from the one used for Line 14. The Residential Clean Energy Credit Limit
Worksheet, for Line 14, is on Page 4 of the form instructions. The Energy Efficient Home Improvement Credit Limit, or Line 29 worksheet, is on page 7 of the form instructions: www.irs.gov/pub/irs-pdf/i5695.pdf
Since this is a nonrefundable tax credit, you usually will have to complete Form 1040, then determine how much of tax credit you can apply to your remaining tax liability. However, you cannot reduce your tax bill below zero, and you cannot carry forward any unused credits to a future tax year.
Hi, my solar roof installation was completed in 2023, Tasha sent me a statement, but I have not paid yet, most likely will happen in 2024. Can I still claim the credit in 2023？ thanks.
The IRS form instructions state: "Costs are treated as being paid when the original installation of the item is completed..."
In this situation, it appears that the IRS would consider you eligible for the credit in 2023 if the work was completed in 2023, even if you don't actually pay the invoice until 2024.
Thank you!
I plan on installing a oil boiler for our house.... it is energy star rated... I don't see where I enter on this form...
For taxpayers who installed a boiler in 2022, you would enter the cost in Line 22a or Line 22b, depending on thermal efficiency. If you to install an oil boiler, then you would have to wait to see if the tax form changes for the 2023 tax year (or 2024 tax year, depending on when you install).
@@teachmepersonalfinance Thank you! Will be installing in 2024....
Probably be same line you stated for 2022, but the credit should change for 30% or $600 max for 2023 - 24...
LINE 17e my house was built in 2001. i had a NEW 16 SEER unit put in 2023 for $9350 . Question do I check box yes or no on LINE 17 e
Since the new AC unit was not related to the original construction of the home, you would check 'No.'
thank you for the quick reply @@teachmepersonalfinance
Can I purchase a 30k home solar system with a 30k traditional ira and use the 30% tax credit to offset the tax liability generated when removing the money from the ira ?
Hi Michael! You can withdraw money from a traditional IRA to purchase a home solar system. However, without knowing more about your tax situation, I'm not sure whether this would be the most advisable option for you. Here are some things that I would consider in this decision:
1. What is your marginal tax bracket? Receiving a $9,000 tax credit might offset your additional tax bill if you're in the 12% tax bracket, but not if you're in the 32% bracket or higher.
2. Are you subject to an early withdrawal penalty?
3. Do you have other tax credits that might impact the credits from your solar system?
I would also consider whether you have other sources of funds that you can use, while allowing you to keep money growing on a tax-deferred basis in your IRA.
Thank-you for answering my question. I am 69 years old so I don’t believe there would be an early withdrawal penalty .I am in the 12% tax bracket category so I believe using the Ira would probably be a good route to go. We are not risky investors, my feeling is we would save approx $ 140. a month on our electric bill and add equity to our home. I realize everyone’s situation would be different,your reply help me and probably others to confirm what I thought would be expectable under tax law. Any further comments would be appreciated. Thanks Again.
Hi. Thanks for your video. Wondering if you could help me. We bought 2 heat pumps in 2021, and we received a $300 credit on our tax return.
Because we had 2 heat pumps installed in our home, were we supposed to get two sets of credits? $300 credit per heat pump for a total of $600 in tax credits?
Not sure if we need to amend our tax return if that's the case and if it's worth it. Thank you for any help.
Hi D,
Thank you for writing! Looking at the IRS Form instructions for 2021, it seems that heat pumps appear in two categories: geothermal heat pumps or electric heat pump water heaters & electric heat pumps. Since I'm not sure which you are referring two, I'll outline what I see in the form instructions:
Geothermal heat pumps: In 2021, taxpayers could take a tax credit equal to 26% of the total costs (including labor and installation), with no limit.
Electric heat pump water heaters & electric heat pumps: In 2021, taxpayers could include the cost of either (or both) of these on Line 22a, Energy-efficient building property, up to $300. But I could find no distinction in the IRS instructions, the federal government's Energy Star website, or within any other guidance that allows you to take double the credits for two pumps. Furthermore, this falls in the category of Nonbusiness Energy Property Credit, which is subject to a lifetime limit of $500.
Given this, I'm not sure whether the additional credit is worth amending your return. If using a paid tax preparer, you might be able to get a better indication on whether you can file an amended return. If using your own tax preparation software, you can play around to see if the software will let you change the entry. If not, I'm not sure it's worth trying to amend your return.
@@teachmepersonalfinance hi. Thank you so much for your response. I even called the IRS to ask this question, but they couldn't help me. Lol.
Oh and it's 2 regular electric heat pumps we installed at our house.
I did have a tax preparer do my 2021 taxes for me and his fees were very expensive. If I decide to amend it myself, I'm not sure what to do. Would I have to just amend Form 5695 only and send that in or do the whole tax return over again? Like you said, I'm not sure if it's worth amending.
We already paid what we owed for our 2021 federal and state taxes. Would we get that leftover $200 credit from the $500 lifetime credit in result of amending?
Thank you again for your help!
I would probably just call the person who prepared your tax return. When you ask him whether you can take the additional credit, he should be able to answer. I imagine that the potential refund might not be worth the cost of filing the amended return, but he should be able to tell you that.
@@teachmepersonalfinance thank you again for your help
So, windows don't qualified?
You may be able to claim a 30% credit on certain windows, up to a maximum of $1,200, as part of the energy efficient home improvement credit (Part II).
Purchasing indoor outdoor AC unit (package). Manufacturer says it is eligible for tax credit on form 5695. I don’t see where I am supposed to enter the amount ( 30% of cost not to exceed $600). Any guidance appreciated.
For the 2022 tax year, the maximum tax credit for an AC system is $300 (30% of total cost), and you would enter this in Line 22a. If you placed the AC unit into service in 2023, then you would be eligible for a tax credit of 30% of cost, NTE $600. The 2023 version of the form hasn't been released yet, so it's hard to say whether you would put it in the same line. However, you can probably expect to enter the costs under .
If I have my roof replaced before installing solar panel. do i add that to the cost of solar panel since its for one project?
If this is for a project that took place in 2022 or earlier, you can take a tax credit of 10% (up to a maximum of $500) for a qualifying roof, regardless of whether or not you installed solar panels. If the roof project is taking place in 2023 or later, you cannot take a credit for the roof, unless the roof consists of solar roofing tiles or solar roofing shingles.
@@teachmepersonalfinance the project started at 2021, I asked Tesla to install solar panel. They inspected the roof but it’s in a bad condition. We have to replace the roof at the end of 2021, the solar panel was installed mid 2022.
According to the IRS form instructions, "For purposes of both credits, costs are treated as being paid when the original installation of the item is completed." For a roof that was completed in 2021, you probably would need to include those costs for your 2021 tax return. Since your solar panel was installed in 2022, you would take the credits in your 2022 tax return.
Below are the Energy Star qualifications for a metal or asphalt roof that was installed in 2022 or earlier.
Roofs (Metal & Asphalt)
**Note: ENERGY STAR certification for roof products was withdrawn effective 6/1/22.
This tax credit is for ENERGY STAR certified metal and asphalt roofs with pigmented coatings or cooling granules designed to reduce heat gain. Certified roof products reflect more of the sun's rays, which can lower roof surface temperature by up to 100F, decreasing the amount of heat transferred into your home.
Tax Credit Amount: 10% of the cost, up to $500 (NOT INCLUDING INSTALLATION)
Requirements
"Metal roofs with appropriate pigmented coatings" and "asphalt roofs with appropriate cooling granules" that also meet ENERGY STAR requirements.
NOTE: Tax Credit does NOT include installation costs.
@@teachmepersonalfinance thanks for clarification