Energetic Credits - Form 5695 Line by Line Guide
The Residential Energy Credit, Form 5695 for short, will be one of the most popular additions to any tax return this year. Here's the deal. The credit limit is $500, savings from the upgrades are immense, energy is saved, and it's a snap to fill out the form. Look at it this way: if you made qualifying purchases and got the $500 back, that's like getting 30% off the price of your materials. Heck, the average price of a six pack is $7 so basically this credit would allow you to buy an extra 428 beers. Gifts like that can't be measured.
The credit has been modified to include certain fuel stoves and asphalt roofs. And remember there's no $500 limit if you've chosen to go green with a qualified solar, wind, or a geothermal power source. Obviously, the property has to be your main home in the United States and not a business or summer escape. Form 5995 is broken up into 2 parts. Part 1 includes any window, insulation, or boiler costs while Part 2 gives a 30% credit for those who have chosen to go the alternative-energy route. Also note that the amount you've declared in previous years will affect this size of your credit this year.
Upgrades
At the top, fill in your name and social security number. Part 1 begins by asking you if the qualified energy improvements or residential energy property costs occurred in the United States, it then asks for your address and if the improvements were related to the main construction of the home. For any improvements were related to the main construction of your home you will need to realize that they can not count as part of your Residential Energy Credit. Line 2 is simply asks for the improvements you might have declared in previous years. Note that if the sum of this credit for previous years is over $500 then you will not be able to declare this credit and should stop filing out this form. Line 3 is simply looking for qualified energy improvements; things like insulation (Line 3a), exterior doors (Line 3b), metal/asphalt roofs (line 3c), and exterior windows (including storm doors and skylights) (line 3d). Obviously all these items need to meet Energy Star guidelines. Note that if you declared window improvements for thus year and in previous years you will have to complete the Window Worksheet at the end of this form. Line 4 has you compute your total qualified energy efficiency improvements by adding lines 3a, 3b, 3c, and 3h. On Line 5 you will just multiply the total from Line 4 by 10%.
Line 6 gives you an opportunity to account for residential energy property costs. Stuff like an electric heat pump that produces an energy factor of 2.0, a central air conditioner that achieves the highest efficiency tier (established by the Consortium for Energy Efficiency), or a natural gas/oil water heater that has an energy factor of at least .80 (or a thermal efficiency of 90%). It even accounts for a burning unit that uses biomass sources (a plant derived renewable fuel) like a pellet stove. 6b has to do with a propane, natural gas, oil furnace, or hot water boiler, while 6c gives credit for a main circulating fan in any of the aforementioned devices.
Now add lines 6a through 6c and enter it on line 7. Add lines 5 and 7 and enter it on line 8. Line 9 is the maximum credit amount of $500. On line 10 you should declare the amount of this credit you received in previous years (from Line 2e). On Line 11 subtract Line 10 from Line 9. So basically to get the maximum credit you need to have not taken this credit in previous years and spent some change on improving the your home's energy efficiency this year. Obviously if Line 11 is negative or zero you won't be able to declare this credit. On line 12 enter the smaller of Line 8 or Line 11. For Line 13 you will need to fill out the Credit Limit Worksheet. On Line 14 enter the smaller of Line 12 and Line 13. This is your Nonbusiness energy property credit. You should enter this credit on Line 52 of Form 1040 or Line 49 of Form 1040NR.
Green is Good
Lines 15 through 18 allow a credit for any type of solar, small wind, or geothermal power source. Once you've tracked down all the data, add it up and enter the total on line 19. Now multiply line 19 by 30% and enter the total on line 20. If you used a qualified fuel cell (that is a combined system that uses plant components to convert fuel into electricity), check yes for line 21a and enter your address, 21b. Then disclose the cost of this system on Line 22. Lastly, be sure to multiply Line 22 by 30% and enter it on Line 23. Now get the kilowatt capacity for your fuel cell, multiply it by $1000, and enter the total on line 24. Now simply enter the smaller of Line 23 or Line 24 on Line 25. When set, go next door, and tell your neighbors the kilowatt capacity of said fuel cell. I'm sure that will make for some interesting conversation.
If you have a credit that you're carrying from 2010, enter it on line 26. Now, add Lines 20, 25, and 26 and enter the total on Line 27. Next get your 1040 and enter the total of line 46 (line 44 on a 1040NR) on line 28 of this form.
Line 29 is a bit dense, so here's the scoop. If you file a 1040 or a 1040NR this line wants to know what other energy-based credits you've gotten. Once you figure it out, subtract line 29 (what you've already applied for) from line 28 (what you're looking to get). If zero or less, enter it on line 30 and 31. If it's more than zero, that's your residential energy property credit; enter that number on line 30.
Subtract line 31 from line 27 and enter it on line 32, this is the amount you can carry into next year.
Fin
Energy consumption, usage, and the sources that provide it, are hot topics. So much so that the government is giving away money to those who have the vision to update their home and conserve power. As always a little planning now, can save you a bundle later, so what's the hold up? Hook yourself up with new windows, insulation, or some green energy. I've just given you 500 reasons to upgrade.
