If your home renovation includes installing energy-saving equipment, a tax credit may be available to you. The residential energy-efficient property credit is intended to stimulate investment in alternative energy equipment for home owners as part of a home renovation. This renovation tax credit is intended to allow an unlimited amount of cost when calculating your tax credit. Homeowners can claim credit for any home, or homes used for personal use, including homes still under construction as well as their current home.
The calculation includes a percentage of the purchase price and labor costs for installation. Equipment that is qualified for credit includes solar-electric panels, solar hot water heaters, geo-thermal heat pumps and wind turbines. However, the costs for purchase and installation of certain types of fuel cells have a maximum credit ceiling. As long as the manufacturer provides a statement confirming the equipment improves energy efficiency, which is sufficient to claim this credit. Complete and file IRS Form 5695 along with your tax return to claim the credit. As these are nonrefundable credits, maximum savings is limited to the amount of tax actually owed for the year.
The home renovation tax credit was developed to promote “green” energy efficiency in residential neighborhoods. The tax credit allows individuals to increase the overall home energy efficiency by encouraging homeowners to renovate their homes earlier, to encourage saving money on home heating costs, while at the same time improving the environment.