TurboTax / Tax Calculators & Tips / All Tax Guides / Tax Deductions and Credits / What Are Home Renovation Tax Credits?

What Are Home Renovation Tax Credits?

Updated for Tax Year 2016


OVERVIEW

If your home-renovation project includes the installation of energy-efficient equipment, a tax credit may be available to you.


Renovating your home can be an expensive endeavor, especially since you can't claim a federal tax deduction to defray the costs. However, if your home-renovation projects include the installation of energy-generating equipment, then you may get some relief by claiming a tax credit. Even if you don't qualify, at least you can reduce your taxable gain when you sell the home by the cost of the renovations. Remember to file away and keep all receipts.

Alternative energy renovations

The residential energy-efficient property credit, intended to stimulate your investment in alternative energy equipment, allows you to include an unlimited amount of costs when calculating the credit. You can claim the credit for renovations you make to any home you own that you use for personal purposes, and even ones under construction.

When calculating the credit, include a percentage of the purchase price and the cost of labor for installation. Equipment that qualifies for the credit includes solar-electric panels, solar hot water heaters, geothermal heat pumps and wind turbines. The only purchases that have a maximum credit limitation are the costs paid to purchase and install certain fuel cells. As long as the manufacturer provides a statement claiming the equipment will improve the energy efficiency of your home, this is sufficient for you to claim the credit. These credits, witht he exception of the solar credits, expire at the end of 2016.

For solar equipment, the credit is available through the end of 2019. After that, the percentage steps down each year and then stops at the end of 2021.

Claiming the credits

When you are ready to prepare your tax return, complete and attach IRS Form 5695 to claim the credit. Since these are all nonrefundable credits, their maximum savings is limited to the amount of tax you actually owe for the year.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


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