If you made energy-efficient upgrades to your home, you may qualify for a federal tax credit. Form 5695 is used to claim certain residential energy credits and can help reduce the amount of tax you owe. Understanding which credit applies to your improvements is the first step toward claiming the savings you're entitled to.
Important for 2026 Returns: Most federal residential energy credits expired for property placed in service after December 31, 2025. However, you may still need Form 5695 if you're claiming a Residential Clean Energy Credit carryforward from a prior year. Always review the latest IRS guidance for your specific situation.
What Is Residential Energy?
Residential energy is the energy used in your home for heating, cooling, lighting, and operating appliances. Making energy-efficient improvements can lower your utility costs and, in some cases, provide valuable tax benefits.
What Are Residential Energy Credits?
Residential energy credits were federal tax incentives designed to encourage homeowners and renters to invest in qualifying energy-saving improvements. Form 5695 includes two separate credits:
- Residential Clean Energy Credit (Part I)
- Energy Efficient Home Improvement Credit (Part II)
Residential Clean Energy Credit (Part I)
The Residential Clean Energy Credit generally allowed taxpayers to claim a credit equal to 30% of the cost of qualified clean energy property installed in a home.
Qualified property included:
- Solar electric (photovoltaic) systems
- Solar water heaters
- Small wind energy systems
- Geothermal heat pumps
- Qualified fuel cells
- Battery storage technology
- Certain labor costs for onsite preparation, assembly, installation, wiring, and piping
Eligibility Requirements
To qualify, the home generally had to:
- Be located in the United States
- Be your main home for most qualifying property
- Be a home you own or rent
- Meet all IRS requirements for the specific property installed
The credit is nonrefundable, meaning it can reduce your tax liability to zero but won't generate a refund by itself. Any unused credit may generally be carried forward to future tax years.
Entering a Prior-Year Credit Carryforward
If you have an unused Residential Clean Energy Credit from a previous year, enter it in:
Federal > Deductions > Credits > Residential Energy Credits > Credit Carryforward from Prior Year
Energy Efficient Home Improvement Credit (Part II)
The Energy Efficient Home Improvement Credit allowed a credit equal to 30% of certain qualifying energy-efficient home improvement costs.
Qualifying improvements included:
- Insulation materials and systems
- Exterior doors
- Windows and skylights
- Central air conditioners
- Certain furnaces and boilers
- Electric panel upgrades
- Home energy audits
- Heat pumps
- Heat pump water heaters
- Biomass stoves and boilers
Annual Credit Limits
The maximum annual credit was generally up to $3,200, divided into two categories:
General Annual Limit: Up to $1,200
This category included most home efficiency improvements, such as:
- Insulation and air sealing materials
- Exterior doors
- Windows and skylights
- Central air conditioners
- Furnaces and boilers
- Certain electrical panel upgrades
- Home energy audits
Separate Annual Limit: Up to $2,000
This category applied to:
- Qualified heat pumps
- Heat pump water heaters
- Biomass stoves and boilers
Because these limits were separate, taxpayers could potentially qualify for up to $3,200 in total annual credits.
Specific Credit Limits
Certain improvements were subject to additional limits:
- Exterior doors: $250 per door, up to $500 total
- Windows and skylights: up to $600
- Qualified energy property items: up to $600 per item
- Home energy audits: up to $150
- Insulation and air sealing materials: subject to the overall $1,200 annual limit
Labor Costs
Labor costs may be included for certain residential energy property expenditures, such as:
- Central air conditioners
- Heat pumps
- Heat pump water heaters
- Certain electrical panel upgrades
Labor costs generally do not qualify for building envelope improvements such as:
- Doors
- Windows
- Insulation materials
Additional Requirements
The credit generally applied only to:
- Existing homes located in the United States
- Your primary residence
It generally did not apply to:
- Newly constructed homes
- Rental properties where you did not live
Unlike the Residential Clean Energy Credit, any unused Energy Efficient Home Improvement Credit cannot be carried forward to future years.
How to Enter Residential Energy Credits
To claim a qualifying residential energy credit in the program:
- Federal
- Deductions (Select my forms)
- Credits
- Residential Energy Credits
Keep receipts, manufacturer certifications, and installation records with your tax documents in case the IRS requests verification. These records can also help support any credit carryforwards you may claim in future years.