Non-business Energy Vs. Residential Energy Efficient Property Tax Credits - IRS Form 5695 - John R. Dundon II, Enrolled Agent
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Non-business Energy Vs. Residential Energy Efficient Property Tax Credits – IRS Form 5695

Business Entity Selection and the Tax Consequences of Converting

Non-business Energy Vs. Residential Energy Efficient Property Tax Credits – IRS Form 5695

The most important thing to remember about the non-business energy property credit and the residential energy efficient property credit is that not all energy-efficient improvements qualify so be sure you have the manufacturer’s tax credit certification statement IN YOUR TAX FILE JUST IN CASE YOU GET AUDITED. Also be sure to understand if the product’s certification meets the standards as some manufacturers seem to very liberally throw around the phrase “energy efficient.” The IRS has offered guidance in these regards and the certification can usually be found on the manufacturer’s website or with the product packaging.

If you’re eligible, you can claim both of these credits on IRS Form 5695 Residential Energy Credits regardless if you itemize your deductions on Schedule A or not. The differences between these credits is worth noting though.

The Non-business Energy Property Credit is generally intended for homeowners who install energy-efficient improvements. The 2011 credit is 10 percent of the cost of qualified energy-efficient improvements, up to $500. Qualifying improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count. You can also claim a credit including installation costs, for certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel. The credit has a lifetime limit of $500, of which only $200 may be used for windows. If you’ve claimed more than $500 of non-business energy property credits since 2005, you can not claim the credit for 2011. As it currently stands qualifying improvements must have been placed into service in your principal residence located in the United States before Jan. 1, 2012.

Residential Energy Efficient Property Credit helps individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines. The credit, which runs through 2016, is 30 percent of the cost of qualified property. There is no cap on the amount of credit available, except for fuel cell property. Generally, you may include labor costs when figuring the credit and you can carry forward any unused portions of this credit. Qualifying equipment must have been installed on or in connection with your home located in the United States; geothermal heat pumps qualify only when installed on or in connection with your main home located in the United States.

Energy Efficient Home Credit is applied for using IRS Form 8908. This form is used by eligible contractors to claim a credit for each qualified energy efficient home sold or leased to another person during the tax year for use as a residence.

Energy Efficient Appliance Credit is applied for using IRS Form 8909. Manufacturers of qualified energy efficient appliances including eligible dishwashers, clothes washers, and refrigerators) use this form to claim the energy efficient appliance credit. The credit is part of the general business credit reported on Form 3800, General Business Credit.