Section references are to the Internal Revenue Code.
Use Form 5695 to figure and take your residential energy credits. The residential energy credits are:
You may be able to take these credits if you made energy saving improvements to your home located in the United States in 2007. For credit purposes, costs are treated as being paid when the original installation of the item is completed, or in the case of costs connected with the construction or reconstruction of your home, when your original use of the constructed or reconstructed home begins. If less than 80% of the use of an item is for nonbusiness purposes, only that portion of the costs that are allocable to the nonbusiness use can be used to determine the credit.
Home. A home is where you lived in 2007 and may include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.
You must reduce the basis of your home by the amount of any credits allowed.
Main home. Your main home is generally the home where you live most of the time. A temporary absence due to special circumstances, such as illness, education, business, military service, or vacation, will not change your main home.
Special rules. If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of such association or corporation.
Subsidized energy financing. Any amounts provided for by subsidized energy financing cannot be used to figure the credits. This is financing provided under a federal, state, or local program, the principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy.
You may be able to take a credit equal to the sum of:
However, this credit is limited as follows.
Caution: If you took the nonbusiness energy property credit in 2006 and the amount on your 2006 Form 5695, line 8, is $500, you cannot take the credit in 2007.
Qualified energy efficiency improvements. Qualified energy efficiency improvements are the following building envelope components installed on or in your main home that you owned during 2007 located in the United States if these components are new and can be expected to remain in use for at least 5 years.
For purposes of figuring the credit, do not include amounts paid for the onsite preparation, assembly, or original installation of the property.
Caution: To qualify for the credit, qualified energy efficiency improvements must meet certain energy efficiency requirements. See Lines 2a Through 2h on page 5 for details.
Residential energy property costs. Residential energy property costs are costs of new qualified energy property that is installed on or in connection with your main home that you owned during 2007 located in the United States. This includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the property. Qualified residential energy property is any of the following.
Caution: To qualify for the credit, qualified residential energy property must meet certain performance and quality standards. See Lines 5a Through 5c on page 5 for details.
Joint ownership of qualifying property. If you and a neighbor shared the cost of qualifying property to benefit each of your main homes, both of you may take the nonbusiness energy property credit. You figure your credit on the part of the cost you paid. The limits on the amount of the credit apply to each of you separately.
Married taxpayers with more than one main home. If both you and your spouse owned and lived apart in separate main homes, the credit limits would apply to each of you separately. If you are filing separate returns, both of you would complete a separate Form 5695. If you are filing a joint return, figure your nonbusiness energy property credit as follows.
Joint occupancy. If you owned your home jointly, each owner must complete his or her own Form 5695. To figure the credit, there are no maximum qualifying costs for insulation, exterior doors, and a metal roof. Enter the amounts you paid for these items on the appropriate lines of Form 5695. For windows and residential energy property costs, the amount allocable to you is the smaller of:
* $2,000 for windows; $300 for energy-efficient building property; $150 for a qualified natural gas, propane, or oil furnace or hot water boiler; or $50 for an advanced main air circulating fan.
These rules do not apply to married individuals filing a joint return.
You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, and fuel cell property. This includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the property and for piping or wiring to interconnect such property to the home. This credit is limited to:
Qualified solar electric property costs. Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in a home located in the United States and used as your home. This includes costs relating to a solar panel or other property installed as a roof or a portion of a roof. The home does not have to be your main home.
Qualified solar water heating property costs. Qualified solar water heating property costs are costs for property to heat water for use in a home located in the United States and used as your home if at least half of the energy used by the solar water heating property for such purpose is derived from the sun. This includes costs relating to a solar panel or other property installed as a roof or a portion of a roof. To qualify for the credit, the property must be certified for performance by the nonprofit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the state in which the property is installed. The home does not have to be your main home.
Qualified fuel cell property costs. Qualified fuel cell property costs are costs for qualified fuel cell property installed on or in connection with your main home located in the United States. Qualified fuel cell property is an integrated system comprised of a fuel cell stack assembly and associated balance of plant components that converts a fuel into electricity using electrochemical means. To qualify for the credit, the fuel cell property must have a nameplate capacity of at least one-half kilowatt of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.
Caution: Costs allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage do not qualify for the residential energy efficiency credit.
Married taxpayers with more than one home. If you or your spouse lived in more than one home that you used as a home, the credit limits would apply to each of you separately. For qualified fuel cell property, the homes must be your main homes. If you are filing separate returns, both of you must complete a separate Form 5695. If you are filing a joint return, figure your nonbusiness energy property credit as follows.
Joint occupancy. If you occupied your home jointly, each occupant must complete his or her own Form 5695. To figure the credit, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $6,667 for qualified solar electric or solar water heating property, and $1,667 for each one-half kilowatt of capacity of qualified fuel cell property. The amount allocable to you is the lesser of:
These rules do not apply to married individuals filing a joint return.
To qualify for the credit, any qualified energy efficiency improvements or residential energy property costs must have been for your main home located in the United States. See Main home on page 3. If you check the "No" box, you cannot take the nonbusiness energy property credit.
Note. Any references to the International Energy Conservation Code (IECC) are treated as references to either the 2001 Supplement of the 2000 International Energy Code or the 2004 Supplement of the 2003 International Energy Conservation Code.
Caution: Do not include on lines 2a through 2d any amounts paid for the onsite preparation, assembly, or original installation of the components.
Line 2a. Enter the amounts you paid for any insulation material or system (including any vapor retarder or seal to limit infiltration) that is specifically and primarily designed to reduce the heat loss or gain of a home when installed in or on such home and may be taken into account in determining whether the building thermal envelope requirements established by the IECC are satisfied.
Caution: A component is not specifically and primarily designed to reduce heat loss or gain of a home if it provides structural support or a finished surface (such as drywall or siding) or its principal purpose is to serve any function unrelated to the reduction of heat loss or heat gain.
Line 2b. Enter the amounts you paid for exterior doors that meet or exceed the criteria established by the IECC for the climate zone in which such doors were installed. Also, enter the amounts you paid for any storm door that, in combination with a wood door assigned a default U-factor by the IECC, does not exceed the default U-factor requirement assigned to such combination by the IECC.
Line 2c. Enter the amounts you paid for a metal roof, but only if this roof has appropriate pigmented coatings, which are specifically and primarily designed to reduce the heat gain of the home, and such roof meets or exceeds the Energy Star program requirements (in effect at the time of installation).
Line 2d. Enter the amounts you paid for exterior windows (including any storm windows installed with such exterior windows) and skylights that meet or exceed the criteria established by the IECC for the climate zone in which these components were installed.
Caution: If you took the credit for windows in 2006 and the amount on your 2006 Form 5695, line 2b, is $2,000, you cannot take the credit for windows in 2007.
Manufacturer's certification. For purposes of taking the credit, you may rely upon a manufacturer's certification in writing that a building envelope component is an eligible building envelope component. Do not attach the certification to your return. Keep it for your records.
Special rule for Energy Star windows and skylights. You may rely upon the Energy Star label that identifies any window or skylight as an eligible building envelope component rather than the manufacturer's certification.
Tip: Also include on lines 5a through 5c any labor costs properly allocable to the onsite preparation, assembly, or original installation of the property.
Line 5a. Enter the amounts you paid for energy-efficient building property. Energy-efficient building property is any of the following.
Do not enter more than $300 on line 5a.
Line 5b. Enter the amounts you paid for a natural gas, propane, or oil furnace or hot water boiler that achieves an annual fuel utilization efficiency rate of at least 95. Do not enter more than $150 on line 5b.
Line 5c. Enter the amounts you paid for an advanced main air circulating fan used in a natural gas, propane, or oil furnace that has an annual electricity use of no more than 2% of the total annual site energy use of the furnace (as determined in the standard Department of Energy test procedure). Do not enter more than $50 on line 5c.
Manufacturer's certification. For purposes of taking the credit, you may rely upon a manufacturer's certification in writing that a product is qualified residential energy property. Do not attach the certification to your return. Keep it for your records.
If the rules on page 4 for joint occupancy apply, cross out the preprinted $500 on line 8 and enter on line 8 the smaller of:
For more details, see Joint occupancy in the first column on page 4.
Tip: Also include on lines 16, 20, or 24, any labor costs properly allocable to the onsite preparation, assembly, or original installation of the property and for piping or wiring to interconnect such property to the home.
Enter the amounts you paid for qualified solar electric property. See Qualified solar electric property costs on page 4.
Enter the amounts you paid for qualified solar water heating property. See Qualified solar water heating property costs on page 4.
Enter the amounts you paid for qualified fuel cell property. See Qualified fuel cell property costs on page 4.
If you are claiming the child tax credit for 2007, include on this line the amount from line 12 of the Line 11 Worksheet in Pub. 972.
Tip: If you are not claiming the child tax credit for 2007, you do not need Pub. 972.
If you cannot use all of the credit because of the tax liability limit (line 32 is less than line 29), you can carry the unused portion of the credit to 2008.
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