IRS Form 5695 Instructions

There are very limited energy tax credits available on your tax return.
Image Credit: David Broberg/iStock/Getty Images

The Internal Revenue Service (IRS) grants tax credits for energy-efficiency improvements to your home. The credit is limited to 30 percent of your costs for property and installation, up to $2,000 for solar electric or solar water heating property, $2,000 for geothermal heat pumps, $500 for each half-kilowatt of fuel-cell capacity, and $4,000 for new wind-generated electrical capacity ($500 for each half-kilowatt of capacity). You list the improvements and figure the total credit on Form 5695, Part II (see References).

Solar Electric Property

Enter the total cost of solar electric property on line 15.

Solar Water-Heating Property

Enter the total cost of solar water-heating property on line 16.

Fuel Cell Property

Enter the total cost of fuel-cell property on line 22. On line 23 multiply by .30. On line 24 enter the kilowatt capacity and multiply by $1,000. Enter the smaller of line 22 or 24 on line 25.

Wind-Energy Property

Enter the total cost of wind energy property on line 17.

Geothermal Heat Pumps

Enter the total cost of geothermal heat pumps on line 18. Add lines 15 through 18 and enter on line 19. Multiply that number by 0.30 on line 20. Add lines 20, 25 and 26 and enter on line 27.

Figuring the Credit

Enter the smaller of line 27 or 30 on line 31 and enter this amount on line 52 of your form 1040. If line 31 is less than line 27, subtract 27 from 31 and enter the amount on line 32. You can carry this remaining credit amount forward to next year's taxes.