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Residential Energy Tax Credits (2014)

April 18, 2014

Many homeowners have been waiting to see what tax incentives the government is offering for energy efficient home improvements made to homes in 2013. By taking advantage of the 2014 residential energy tax credit, homeowners who have invested in energy-saving measures to their homes may be able to reduce their tax burden, if they qualify.

Nonbusiness Energy Property Credit

The Nonbusiness Energy Property Credit can be applied towards any residential energy property costs that were paid or incurred in 2013. It can also be put towards 10% of the cost of qualified energy efficiency improvements that are new and can be expected to remain in use for at least five years, and meet energy efficiency requirements.

  • Eligible residential energy property includes:
    • Certain electric heat pumps water heaters; electric heat pumps; central air conditioners; natural gas, propane or oil water heaters; and stoves using biomass fuel.
    • Qualified natural gas, propane or oil furnaces; and qualified natural gas, propane or oil hot water boilers.
    • Certain advanced main air circulating fans used in natural gas, propane or oil furnaces.

Eligible energy efficiency improvements include:

  • Insulation: Must be specifically designed to reduce heat loss or gain of a home.
  • Exterior doors.
  • Exterior windows, including skylights.
  • Metal or asphalt roofs with pigmented coatings or cooling granules specifically designed to reduce the home’s heat gain.
  • This credit has a lifetime limit of $500 for all years after 2005, broken down into the following bracket:
    • $200 for windows.
    • $50 for any advanced main air circulating fan.
    • $150 for any qualified natural gas, propane for oil furnace, or hot water boiler.
    • $300 for any item of energy efficient building property, i.e., water heaters and heating and air conditioning systems.
    • To qualify for the Nonbusiness Energy Property Credit, your main home must be located in the U.S.
  • Check with the manufacturer for written certification to make sure their product(s) are eligible for this home energy tax credit. You can usually find it posted on their website(s) or with the packaging.
  • Keep the certification with your tax records – there is no need to attach it to your return.
  • Although this credit expired at the end of 2013, you can still claim the credit on your 2013 tax return if you didn’t reach the lifetime limit in prior years.
  • Should the total of nonbusiness energy property credits you have taken in previous years (after 2005) exceed more than $500, you cannot apply for this credit for 2013.

Residential Energy Efficient Property Credit

You can apply this home energy tax credit towards 30% of the cost of alternative energy equipment installed on or in your home.

Qualified equipment can include the following:

  • Solar electric property.
  • Solar water heating property.
  • Fuel cell property.
  • Small wind energy property.
  • Geothermal heat pump property.
  • Qualified fuel cell property credit is limited to $500 for each one-half kilowatt of capacity of the property.
  • There is no dollar limit on the Residential Energy Efficient Property Credit for most types of property. If your credit exceeds the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
  • To qualify for this home energy tax credit, the home must be in the U.S. but it does not have to be your main home.
  • This credit is available through 2016.
  • To apply for this credit, complete Form 5695 and attach it to your Form 1040; enter the credit on line 52 on Form 1040.

For more information on how to claim home energy tax credits on your 2013 tax return, go to IRS.gov.

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