Residential Clean Energy Credit

Description

If you invest in renewable energy for your home such as solar, wind, geothermal, fuel cells or battery storage technology, you may qualify for an annual residential clean energy tax credit.

Eligibility

You may claim the residential clean energy credit for improvements to your main home, whether you own or rent it. Your main home is generally where you live most of the time. The credit applies to new or existing homes located in the United States.

You can’t claim the credit if you’re a landlord or other property owner who doesn’t live in the home.

You may be able to claim a credit for certain improvements made to a second home located in the United States that you live in part-time and don’t rent to others. You can’t claim a credit for fuel cell property for a second home or for a home that is not located in the United States. Find more on qualifying residences.

Business use of Home

If you use a property solely for business purposes, you can’t claim the credit.

If you use your home partly for business, the maximum available credit for eligible clean energy expenses is as follows:

• Business uses up to 20% full credit
• Business uses more than 20% credit based on share of expenses allocable to nonbusiness use

Clean energy property must meet the following standards to qualify for the residential clean energy credit:

• Solar water heaters must be certified by the Solar Rating Certification Corporation or a comparable entity endorsed by your state.
• Geothermal heat pumps must meet Energy Star requirements in effect at the time of purchase.
• Battery storage technology must have a capacity of at least 3 kilowatt hours.

How the Program Works

The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property for your home installed anytime from 2022 through 2032. The credit percentage rate phases down to 26 percent for property placed in service in 2033 and 22 percent for property placed in service in 2034. You may be able to take the credit if you made energy saving improvements to your home located in the United States.

The credit is nonrefundable, so the credit amount you receive can’t exceed the amount you owe in tax. You can carry forward any excess unused credit, though, and apply it to reduce the tax you owe in future years. Do not include interest paid including loan origination fees.

The credit has no annual or lifetime dollar limit except for credit limits for fuel cell property. You can claim the annual credit every year that you install eligible property until the credit begins to phase out in 2033.

How to Apply

File Form 5695, Residential Energy Credits with your tax return to claim the credit. You must claim the credit for the tax year when the property is installed, not merely purchased.

For additional instructions on how to claim the credit for residential clean energy follow our step-by-step guide.

Contact Information

Internal Revenue Service (IRS),
1111 Constitution Avenue, N.W.,
Washington, D.C. 20224
(800) 829-1040