Tax Tip 2016: Tax Credits for Home Energy Efficiency

It's the last year to snag an energy tax break on new windows, solar and more.

Your 2016 return is the last chance to claim a tax credit for installing energy-efficient windows or making similar energy-saving home improvements.

You can claim up to $500 in total tax credits for eligible improvements, based on 10% of the purchase cost (not installation) of certain insulation, windows, doors and skylights. The credit is subject to a lifetime cap, so if you’ve already pocketed the max, you’re out of luck.

But there’s no such limit on those who install qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines in 2016. Your credit can be 30% of the total cost (including labor) of such systems.

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Note that these tax credits are “nonrefundable,” meaning the credit can lower the amount of tax you owe to zero, but it can’t result in a refund. See IRS Form 5695 for more.

Check out all 23 commonly overlooked tax deductions.

Kevin McCormally
Chief Content Officer, Kiplinger Washington Editors
McCormally retired in 2018 after more than 40 years at Kiplinger. He joined Kiplinger in 1977 as a reporter specializing in taxes, retirement, credit and other personal finance issues. He is the author and editor of many books, helped develop and improve popular tax-preparation software programs, and has written and appeared in several educational videos. In 2005, he was named Editorial Director of The Kiplinger Washington Editors, responsible for overseeing all of our publications and Web site. At the time, Editor in Chief Knight Kiplinger called McCormally "the watchdog of editorial quality, integrity and fairness in all that we do." In 2015, Kevin was named Chief Content Officer and Senior Vice President.