What are residential energy credits?

Individuals who purchase qualified energy efficient improvements for their main home may be allowed nonrefundable tax credits. There are two types of residential energy credits:

• Residential clean energy credit (previously named the residential energy efficient property credit) (Form 5695, Residential Energy Credits, Part I, which is out of scope for the VITA/TCE programs)
• Energy efficient home improvement credit (previously named the nonbusiness energy property credit) (Form 5695, Part II)

What is the energy efficient home improvement credit?

This non-refundable credit has no lifetime limit. The maximum total yearly credit of $3,200 is comprised of separate $1,200 and $2,000 limits. The following are eligible:

• A $1,200 aggregate yearly credit limit applies across any combination of building envelope components, home energy audits, and residential energy property
• A separate $2,000 aggregate yearly credit limit applies across all heat pump water heaters, heat pumps, and biomass stoves and biomass boilers (30% of costs, including labor)

Refer to your Publication 4012, Tab G. For details on qualified expenditures, review the Form 5695 Instructions or the FAQs on IRS.gov for more information.