If you have made energy-efficient home improvements, then the IRS Form 5695 needs to be filled if you are eligible for energy saving tax credits. The Buzzle article below will enlist the instructions to fill IRS Form 5695.
Did You Know?
IRS Form 5695 helps you apply for a credit that is equivalent to 30% of your investment, thus, saving a lot of your energy consumption.
The Internal Revenue Service (IRS) contains a number of forms to be filled that lets the taxpayers report income, claim tax credits, cancel tax, reduce distribution tax, etc. One of these forms is Form 5695. It is filled in order to claim credits for energy efficient products, which you are using at that point. This form contains certain data fields that borrow their values from other IRS forms (whose names are mentioned in the article, of course); in any case, as a prerequisite, you have to ensure that you have filled IRS Forms 1024, 8859, 8810, 8396, 8936, and 8839 with you prior to filling up this form. Also, remember that taxpayers need to fill this form even if, according to calculations, they do not qualify for credit. The IRS Form 5695 instructions summarized below will tell you how to carry out the same.
- Energy-saving equipment, like a solar water heater or windmill will always contribute immensely towards conservation of energy sources of the nation.
- These energy-efficient products and methods help reduce pollution and other environmental hazards, thus helping create a greener Earth.
- According to the law, if a U.S. resident has installed such energy-saving appliances at his home, he/she is eligible for a tax credit.
- The tax Form 5695 contains sections that help you file for a credit. The paragraphs below provide instructions on how to fill up this form.
Instructions to Fill Form 5695
- To begin with, read the form carefully. It consists of 6 pages, two of which are the main ones to be filled.
- The form consists of two parts: ‘Residential Energy Efficient Property Credit’ and ‘Nonbusiness Energy Profit Credit’.
- Part I contains the residential energy efficient property credit, involves the installation of solar water heaters, electric systems, heat pumps, and wind turbines.
- Part II contains the nonbusiness energy profit credit that includes insulated roofs, skylights, efficient air-conditioning systems, stoves, etc.
- Before you begin, you need to calculate the amounts of the credits you can claim. This includes adoption credit, elderly credit, mortgage interest credit, qualified plug-in electric vehicle credit, etc.
- Now, as you notice part I, you will see a series of lines, mentioning the different costs. You are supposed to fill whatever costs may have been incurred, in lines 1 to 4. Then, add the values and enter the result in line 5.
- Multiply the above answer with 0.30 (30%), and write the result on line 6.
- Line 7 has two sections: 7a and line 7b. On line 7a, you have a ‘yes/no’ question. If you tick ‘No’, you can skip lines 7b to 11. If ‘Yes’, then proceed.
- Line 7b is where you need to fill in your registered address.
- On line 8, enter the fuel cell property costs. Multiple it again by 0.30, and mention the result on line 9.
- Enter the qualified fuel cell costs in KW capacity; multiply the costs by USD 1000, and write the result on line 10.
- Compare the values on lines 9 and 10, and enter the smaller value on line 11.
- If you have any credit carryforward from the previous year, you need to skip the above steps and arrive straight to line 12.
- Enter the credit carryforward amount on line 12.
- Add the values on line 6, 11, and 12. Enter the answer on line 13.
- For line 14, you need to refer to the ‘Residential Energy Efficient Property Credit Limit Worksheet’ provided on page 5.
- You will need a series of IRS forms to fill up this worksheet.
- To begin with, enter the value from line 46 of Form 1040 on line 1 of this section.
- Next, enter the total credit amount on line 2―by adding the values from lines 47 to 50, of Form 1040.
- If you have any nonbusiness energy property credit, enter it on line 3.
- Enter the child tax credit amount on line 4 (if any).
- On line 5, enter the value that can be obtained from line 9 of Form 8396.
- On line 6, enter the value that can be obtained from line 16 of Form 8839.
- On line 7, enter the value that can be obtained from line 3 of Form 8859.
- On line 8, enter the value that can be obtained from line 15 of Form 8910.
- On line 9, enter the value that can be obtained from 23 of Form 8936.
- Add the values from line 2 to line 9, and enter the result on line 10.
- Subtract this value from the value on line 1, enter the result on line 11.
- This value is the tax liability limitation value and needs to be entered on line 14 of part I of this form.
- Now, compare the values of lines 13 and 14, and enter the lesser of the two on line 15.
- If this value is less than the value on line 13, subtract the former from the latter, enter the result on line 16.
- This value is basically credit carryforward for the next year. In case you are unable to enter this value due to the tax liability limit, you can declare the carryforward to be some unused portion of the credit.
- Before proceeding to part II, decide the claim amount for elderly/disabled credit.
- Line 17a is a ‘yes/no’ question, where you are asked if the energy improvements were located in the United States.
- If you tick on ‘no’, you do not qualify for the nonbusiness energy property credit. Filling up part II does not make any sense.
- If you tick on ‘yes’, enter your address on line 17b.
- On line 17c, you will be asked if the improvements in question are related to the main home construction. If you tick on ‘yes’, you qualify only for those credits which were not related to the main construction.
- For line 18, you need to refer to the ‘Lifetime Limitation Worksheet’ on page 5.
- Here, you have to fill amounts from Form 5695 from the previous 7 years.
- Rewind to 7 years back, for instance, if the year is 2013, refer to line 12 of Form 5695 of the year 2006, enter this amount on line 1.
- Similarly, refer to the same form from the next year (considering the above example, year 2007), and enter the value from line 15 onto line 2 of this worksheet.
- Line 3 gets its value from line 11 of Form 5695 of the next year (2009).
- On line 4, enter the value from line 11 again, from the same form, filled in the next year (2010).
- Line 5 will contain the value from line 14, Form 5965, of the next year (2011).
- Finally, on line 6, enter the value from line 32 of the 2012 Form 5965.
- Add the 6 values above, and enter the result on line 7. This value is to be entered on line 18 of part II of the current year Form 5965 as well.
- Also, if this value is above USD 500, you cannot qualify for the nonbusiness energy property credit.
- Line 19 of Form 5965 contains a series of sub-points. You have to enter the different costs you spent on the improvements.
- On line 19a, enter the cost of the insulation material used.
- On line 19b, enter the cost of the exterior doors.
- On line 19c, enter the cost of the metal roofs with pigmented coatings.
- Line 19d will contain the costs of the exterior doors and skylights.
- Line 19e will contain the maximum amount to figure out the credit.
- Line 19f needs to be filled only if the cost of the window treatments have been entered in the same form previously.
- This value needs to be subtracted from the value on line 19e. Enter the value on line 19g. If it is less than 0, enter 0.
- Compare lines 19d and 19g. Enter the lesser value on line 19h.
- Add the values on lines 19a, 19b, 19c, and 19h. Enter the value on line 20.
- Multiply the same by 0.10 (10%), and enter the result on line 21.
- On line 22a, enter the amount spent on energy-efficient building property. The amount entered should not be more than USD 300.
- On line 22b, enter the amount spent on natural gas, oil furnace, etc. This value should not exceed USD 150.
- Enter the amount spent on the main air circulating fan for the natural gas, propane, etc., on line 22c. This amount should not be more than USD 50.
- Add the above three values, and enter the result on line 23.
- Add the values on line 21 and 23. Enter the result on line 24.
- If you jointly own the house with someone else (apart from your spouse), that person has to fill this form too. You can then calculate the cost incurred on metal roofs, insulation, and exterior doors.
- On line 25, cancel the USD 500, and enter the maximum credit amount. This has to be lesser than the amount on line 24. Otherwise, multiply USD 500 by a fraction, where the numerator is the amount on line 24, and the denominator is the total amount on line 24 (for all owners).
- Enter the value from line 18 on line 26.
- Subtract this value from the one on line 25. If the answer is 0, you do not qualify for the nonbusiness energy property credit. If it is not, you can move ahead.
- Compare the values on lines 24 and 27, enter the smaller one on line 28.
- For line 29, you have to consult the ‘Nonbusiness Energy Property Credit Limit Worksheet’ on page 6.
- On line 1 of the worksheet, enter the amount from line 46 of Form 1040.
- On line 2, enter the total credit amount from Form 1040 (if any). This amount will be the addition of the values on lines 47 to line 50 from Form 1040.
- Subtract this value from the one on line 1. Enter the result on line 3 as well as line 20 of part II of Form 5965.
- This value also needs to be more than 0, else you do not qualify for the nonbusiness energy property credit.
- Now, compare the values on lines 28 and 29. Enter the lesser one on line 30. This value is your nonbusiness energy property credit.
Form 5695 is very simple to fill and the IRS has provided a very good way to encourage people to become more environment-friendly. More and more people are finding ways to make improvements in their home, like using a pigment-coated roof, insulation, etc. Through this, they help stabilize the environment as well as qualify for a tax credit.