Form 5695: Claiming Residential Energy Credits for 2024

Homeowners who invest in making their properties more energy-efficient may be eligible for tax credits. The Internal Revenue Service (IRS) provides Form 5695, Residential Energy Credits, to claim these benefits for qualifying expenses made during the 2024 calendar year. When filing in 2025, this form allows homeowners to reduce their tax liability through two distinct credits aimed at encouraging energy conservation and the use of renewable energy sources.

The Energy Efficient Home Improvement Credit

This credit is designed for homeowners who make specific energy-saving upgrades to their main home in the United States. To qualify, the property must be your primary residence where you live most of the time; rentals or homes you don’t use regularly are not eligible. The improvements must be installed in or on this main home, and you must be the original user of the components, which are expected to remain in service for at least five years.

The credit is calculated as 30% of the cost of qualifying expenditures, but it is subject to annual limits. There is a general maximum credit of $1,200 per year, composed of smaller limits for different types of property. For instance, the credit for all new exterior doors and windows combined cannot exceed $600 annually, and a home energy audit is eligible for a credit of up to $150.

Specific limits also apply to insulation, air sealing systems, central air conditioners, and energy-efficient water heaters or furnaces. It is important to track these individual limits, as you cannot simply claim 30% of your total costs if they exceed these thresholds.

The Residential Clean Energy Credit

The Residential Clean Energy Credit incentivizes the installation of systems that generate power from renewable sources. This credit can be claimed for your main home, and in some cases, for a second home, as long as it is not used as a rental property. The costs can include both the equipment and the labor for onsite preparation, assembly, and original installation.

Qualifying installations for new, clean energy property include:

• Solar electric panels that generate electricity for the home
• Solar water heaters that meet specific certification standards
• Small wind turbines
• Geothermal heat pumps that meet Energy Star requirements
• Battery storage technology with a capacity of 3 kilowatt-hours or more

The credit is equal to 30% of the total cost of the new clean energy property, including installation. A key feature of this credit is that there is no overall dollar limit, and if your tax liability is not large enough to use the entire credit in one year, the unused portion can be carried forward.

Information and Documentation to Gather

You will need to compile all receipts and invoices that detail the costs for both materials and labor for every qualifying improvement. These documents should clearly separate the costs for each category of upgrade, as different limits may apply.

A Manufacturer’s Certification Statement is another important document. This is a signed statement from the manufacturer certifying that a product meets the specific energy efficiency standards required for the tax credit. You should keep these statements with your tax records but do not need to attach them to your return.

If you have an unused portion of a residential energy credit from a previous year, you will need the prior year’s Form 5695. This form will show the amount of any credit carryforward that can be applied to your current year’s tax return.

Completing and Filing Form 5695

The form is divided into two main parts. You will begin with Part I for the Residential Clean Energy Credit if you have qualifying expenses. On lines 1 through 5b, you will enter the total costs for your solar, wind, geothermal, and battery storage properties based on your collected receipts.

After entering these costs, you will sum them and multiply the total by 30% on line 6a to calculate the credit amount. The form then guides you through a tax liability limitation worksheet to determine how much of the credit you can use in the current year. This worksheet considers your total tax liability and other credits you may be claiming.

Part II of the form addresses the Energy Efficient Home Improvement Credit. Here, you will enter the costs for items like windows, doors, insulation, and energy audits on the corresponding lines. The form has built-in limitations for these items, so you will enter the lesser of your actual cost or the specific dollar limit for each category.

After summing these amounts, you will calculate 30% of your costs for larger equipment like heat pumps and boilers, again subject to annual limits, before arriving at your total credit on line 32. The final credit amount calculated on Form 5695 is then transferred to Schedule 3 (Form 1040), Additional Credits and Payments. You must attach the completed Form 5695 to your Form 1040, 1040-SR, or 1040-NR when you file your tax return.