Last Updated : January 14, 2009
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5695

Form 5695

Residential Energy Credits

Purpose of the Form:
Form 5695 is used to figure and take your residential energy credits for 2006.
The Residential Energy Credits are:

  • The nonbusiness energy property credit.
  • The residential energy efficient property credit.

Who Can Claim The Credit:
Taxpayer may request a credit or refund if he/she:

  • Has made energy saving improvements to your home located in the United States in 2006.
  • The Home where improvements are being made must be client’s main home in the case of
  • Nonbusiness energy property credit.
  • Also, energy saving improvements must meet certain energy efficiency requirements.
  • Also, qualified residential energy property must meet certain performance and quality standards.
  • Special rules apply if you are a member of a condominium management association for a condominium you own or a tenant – stockholder in a co-operative housing corporation; you are treated as having paid your proportionate share of any costs of such association or corporation.
  • Any amounts provided for by the subsidized energy financing cannot be used to take the credits.

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 the item is for nonbusiness purposes, only that portion of the costs that are allocable to the non business use can be used to determine the credit.

For the purposes of taking the credit, you may rely upon a manufacturer’s certification in writing. Do not attach the certification to the return but it is to be kept for your records.

Married taxpayers with more than one main home:
Only married taxpayers filing a joint return that both owned and lived apart in separate main homes may file 2nd copy of Part- I of form 5695. Part- II of 2nd copy of Form 5695 should be completed by married taxpayers filing jointly who lived in more than one home that they used as a home. Complete Part- II of the first copy of Form 5695 for one home before completing the second copy part- II for the other home.

Shared costs of joint occupants:
These rules do not apply to a husband and wife who are filing a joint return. For other filing status, if the taxpayer occupied a home jointly and shared the cost of energy efficient property, you must figure the amount allocable to the taxpayer.

PART-I NON BUSINESS ENERGY PROPERTY CREDIT

The “nonbusiness energy property credit “ in part- I of form 5695 , may only be claimed for the cost of Qualifying Energy property installed in connections with your client’s main home in the U.S. You need not complete part- I if “NO” checkbox is checked on line 1.
 
 You may be able to take a credit equal to the sum of:

  • 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2006.
  • Any residential energy property costs paid or incurred in 2006.

 
However, this credit is limited as follows:

  • A total combined credit limit of $500 for all tax years after 2005.
  • A combined credit limit of $200 for windows for all tax years after 2005.
  • A credit limit for residential energy property costs for all tax years 2005

Of $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any Item of energy efficient building property.

Line 1:
The user has to manually check the YES checkbox if the qualify energy efficiency improvements or residential energy property costs were made to your main home located in the United States. If you check the NO checkbox, you cannot take the non business energy property credits.

Line 2a through 2d:
Do not include on lines 2a through 2d any amounts paid on the onsite preparation , assembly, or original installation of the components.

Line 2a:
Enter the amounts paid for any insulation material or system that is specifically and primarily designed to reduce the heat loss or gain of a home. The items that are considered as not Qualified are those which provide structural support or a finished surface (such as drywall or siding) or that has principal purpose to serve any functions unrelated to the reduction of heat loss or heat gain.

Line 2b:
Enter the amounts you paid for exterior windows and skylights that meet or exceed the criteria established by the IECC for the climate zone in which such doors were installed.
Do not enter more than $2000 on line 2b.

Line 2c:
Enter the amounts paid for exterior doors that meet or exceed the criteria established by the IECC for the climate zone in which such doors were installed. A storm door also qualifies if, in combination with a wood door assigned a default U-factor by the IECC , it does not exceed the default U-factor requirement assigned to such combination by the IECC.

Line 2d:
Enter the amounts paid for a metal roof, bur 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.

Line 3:
This line is automatically calculated in our package. Here addition of line 2a through 2d is done.

Line 4:
This line is automatically calculated in our package. Here line 3 is multiplied by 0.10 & result is entered on this line.

Line 5a through 5c:
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 paid for energy-efficient building property. Refer the IRS instructions for examples of energy –efficient building property.
Do not enter more than $300 on line 5a.

Line 5b:
Enter the amounts 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 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. Do not enter more than $50 on line 5c.

Line 6:
This line is automatically calculated in our package. Here addition of line 5a through 5d is done.

Line 7:
This line is automatically calculated in our package as it is the sum of above
Line 4 & line 6.

Line 8:
This line is automatically calculated in our package. Here lower of line 7 or $500 is
entered on this line.

If the taxpayer and spouse are married filing jointly and lived apart in separate
Main homes, then refer to instructions in general of married taxpayers with more than one main home for how the amounts to be reported on this line.

Line 9:
Amount on this line transfers from Form 1040, line 46 (or Form 1040NR line 43).

Line 10:
Amount on this line transfers from Form 1040, line 47 through 51 (or Form 1040NR
Lines 44 through 46)

Line 11:
This line is automatically calculated in our package. Here line 10 is subtracted from Line 9.If the result is zero or negative then you cannot take the non business energy property credit.

Line 12:
This line is automatically calculated in our package. It is lower / minimum of line 8 Or line 11 calculated above. This is non business energy property credit which flows to line 31 of the Form 5695 pg-2.

PART-II: RESIDENTIAL ENERGY EFFICIENT PROPERTY CREDIT
 
The residential energy efficient property applicable to Part-II must be purchased for use in a home located in the United States and which is also used as a home. In addition, qualified fuel cell property must be installed in connection with the main home.

The residential energy efficient property credit is available for 30% of the cost 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:

  • $2000 for Qualified solar electric property costs,
  • $2000 for Qualified solar water heating property costs AND
  • $500 for each half kilowatt of capacity of a Qualified fuel cell property for which qualified fuel cell property costs are paid.

Line 13:
Enter the costs incurred manually for qualified solar electric property.
These are the costs for property that uses solar energy to generate electricity for use in a home located in the United States and used as a home. This includes costs relating to solar panel or other property installed as a roof or a portion of a roof. The home need not be your main home.

Line 14:
This line is automatically calculated in our package. Here line 13 is multiplied by 0.30 & result is entered on this line.

Line 15:
This line is fixed  in our package as per 2006 instructions as it is maximum allowable credit for 2006 in case of costs incurred for qualified solar electric property.
 
Line 16:
This line is automatically calculated in our package. It is lower / minimum of line 14
Or line 15 calculated above.

Line 17:
Enter the costs incurred manually for qualified solar water heating property.
These are the costs for property to heat water for use in a home located in the United States and used as a home if at least half of the energy used by the property for such purpose is derived from the sun. This includes costs relating to solar panel or other property installed as a roof or a portion of a roof. The property must be certified for performance by the non profit 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 the main home.

Line 18:
This line is automatically calculated in our package. Here line 17 is multiplied by 0.30 & result is entered on this line.

Line 19:
This line is fixed  in our package as per 2006 instructions as it is maximum allowable credit for 2006 in case of costs incurred for qualified solar water heating property.

Line 20:
This line is automatically calculated in our package. It is lower / minimum of line 18
Or line 19 calculated above.

Line 21:
Enter the costs incurred manually for qualified fuel cell property.
These are the costs for qualified fuel cell property installed on or in connection with main home located in 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. The fuel cell property must have a nameplate capacity of at least one-half kilowatt of electricity using an electrochemical process and electricity-only generation efficiency greater than 30%.

Line 22:
This line is automatically calculated in our package. Here line 21 is multiplied by 0.30 & result is entered on this line.

Line 23:
Here the user needs to manually enter the kilowatt capacity of the fuel cell property. The result on line 23 is the multiplication of kilowatt capacity by $1000 fixed by the IRS for 2006.

Line 24:
This line is automatically calculated in our package. It is lower / minimum of line 22
Or line 23 calculated above.

Line 25:
This line is automatically calculated in our package. Here addition of line 16, line 20 and line 24 is done.

If the taxpayer and spouse are married filing jointly and lived apart in separate
Main homes, then refer to instructions in general of married taxpayers with more than one main home for how the amounts to be reported on this line.

Line 26:
Amount on this line transfers from Form 1040, line 46 (or Form 1040NR line 43).

Line 27:
Amount on this line transfers from Form 1040, line 47 through 51, line 53 and line 54 and Form 5695 pg-1 line 12 (or Form 1040NR Lines 44 through 46, line 48 ,line 49 and Form 5695 pg-1 line 12).

Line 28:
This line is automatically calculated in our package. Here line 27 is subtracted from
Line 26.If the result is zero or negative then you cannot take the Residential energy efficient property credit.

Line 29:
This line is automatically calculated in our package. It is lower / minimum of line 25
Or line 28 calculated above.
This is Residential energy property credit which flows to line 31 of the Form 5695 pg-2.

Line 30:
This line is automatically calculated in our package. Here if line 29 is 0 then whole amount of line 25 is the credit carry forward to 2007.
If line 29 is less than line 25 the line 29 is subtracted from line 25 and the result is entered here. This result is the credit carry forward to 2007.

Line 31:
The non business property credit from line 12 and the residential energy efficient property credit from line 29 are combined on line 31. This total amount then flows to Form 1040, Line 52 (or Form 1040NR line 47).

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