Note: Credits for solar electric property and solar water heating property have never been in-scope for Tax-Aide. Only Part II of Form 5695 is (and has been) in-scope.  Also out-of-scope are the new credits for “green” vehicles, fuel cells, wind turbines, geothermal heat pumps, and battery storage technology.

  • Page G-20 of Pub 4012 has information on what qualifies for the residential energy credit (“energy efficient home improvement credit”) and limitations; also refer to the Instructions for Form 5695 as necessary.
    • Note: Legislation passed in 2022 increased this credit for property placed in service after 2022; the increase does not apply to prior tax returns.
      • For 2023 through 2032, the credit is 30% of the cost of qualifying improvements, with an overall annual maximum of $1,200 and no lifetime limit.
      • Heat pumps, biomass stoves, and boilers have a separate annual credit limit of $2,000.
    • For prior returns, the credit was 10% of qualifying improvements, with maximum amounts on some items, and an overall maximum of $500 for all years since 2005.
    • In-scope items that potentially qualify for the credit are home-energy audits, insulation, exterior doors, roofing, exterior windows and skylights, purchase of an energy-efficient building, and furnaces and hot water boilers (including a main air circulating fans).
  • Go to Form 5695 - Non-Business Energy Property page [Deductions > Credits Menu > Residential Energy Credit].
    • Note:  revised TaxSlayer screens were not yet available as of the date of this manual, so these instructions assume the prior-year screen layouts.
    • Check the box “The energy efficiency improvements or residential energy property costs were made to the taxpayer’s main home located in the United States”, if applicable.
      • Second homes, rental homes and other property do not qualify. 
    • Do not check the box indicating the improvements were related to the construction of the home.  These improvements are out-of-scope.
    • Click “Continue.”
    • On the Form 5695 page, on the “Nonbusiness Energy Property” line, click “Begin.” 
      • The other item, “Energy Efficient Improvement”, is out-of-scope. 
  • On the Form 5695 – Nonbusiness Energy Property page, enter the following information: 
    • For the address of the main home, clicking the red underlined “Use my main address” fills in the address from the Basic Information section. 
    • In the “Qualifying Improvements” section of this page, enter the dollar amount(s) spent.
      • For certain items, such as insulation, only the costs of the material can be claimed – not the costs of installing the material, or permits, or any other costs. 
      • The taxpayer must have documentation, such as a billing from the contractor, for such items, to separate material costs from all other costs.
    • Click “Continue” to finish the page.

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