2 Tax Credits to Claim for Energy-Efficient Home Renovations

These tax incentives reward energy-efficient home improvements in different ways. Which credit you use depends on the remodeling you do.

Concept art of a house with trees growing out of it.
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Two federal income tax credits reward energy-efficient home improvements very differently. Which credit you use depends on the improvements you make. Under federal tax law, new energy-efficient windows and doors don't count for much, but a system that uses renewable energy to power a home gets you a juicy tax break. The credits differ in other ways, with one imposing a cap and the other, for the most part, placing no such limit. Whether home improvements to a vacation home can qualify is another differentiator.

Neither of these tax credits is refundable; they can only be used to reduce the amount of income tax owed. If the credit exceeds your tax liability, the IRS won't refund you the difference. Eligible homeowners claim the credits on IRS Form 5695 (opens in new tab). Although the clock is ticking for the use of both home improvement credits, it may be less of a problem than you think.

Joy Taylor
Editor, The Kiplinger Tax Letter

Joy is an experienced CPA and tax attorney with an L.L.M. in Taxation from New York University School of Law. After many years working for big law and accounting firms, Joy saw the light and now puts her education, legal experience and in-depth knowledge of federal tax law to use writing for Kiplinger. She writes and edits The Kiplinger Tax Letter and contributes federal tax and retirement stories to kiplinger.com and Kiplinger’s Retirement Report. Her articles have been picked up by the Washington Post and other media outlets. Joy has also appeared as a tax expert in newspapers, on television and on radio discussing federal tax developments.