IRS Energy Tax Credits

Quick Guide to IRS Form 5695 for Heating and Air Conditioning (2024)  

IRS Form 5695 allows homeowners to claim tax credits for qualifying energy-efficient heating and air conditioning systems, among other home energy improvements. The tax credits under this form are part of the Energy Efficient Home Improvement Credit, which provides a 30% tax credit for eligible upgrades made between 2023 and 2032. This can help reduce the upfront cost of installing high-efficiency HVAC systems.

What Qualifies for IRS Form 5695 in 2024?

For heating and air conditioning systems, homeowners can claim tax credits for the following:

1. ENERGY STAR® Certified Air Conditioners
   High-efficiency air conditioners that meet ENERGY STAR® specifications qualify for tax credits. This includes both the purchase and installation costs.

2. ENERGY STAR® Certified Heat Pumps
   Heat pumps are efficient alternatives to traditional heating and cooling systems. If homeowners install a qualifying ENERGY STAR® heat pump, they can claim a 30% tax credit on the cost of the unit and installation.

3. High-Efficiency Heating Systems
   Systems like ENERGY STAR® certified furnaces, boilers, and other heating equipment also qualify for tax credits.

4. Smart Thermostats
   The installation of smart thermostats that help optimize energy use in heating and air conditioning systems can also be eligible for tax credits.

How to Fill Out IRS Form 5695 for HVAC Systems

1. Determine Eligibility
   Confirm that the HVAC systems being installed meet the ENERGY STAR® certification to ensure eligibility for the tax credit.

2. Gather Documentation
   Homeowners should keep receipts and documentation showing the total cost of the equipment, installation, and any related expenses.

3. Calculate the Credit
   Homeowners can claim 30% of the total cost (up to $1,200 per year for combined energy-efficient home improvements, including HVAC systems).

4. Complete Form 5695
   Homeowners should complete Part I of Form 5695 to claim the Energy Efficient Home Improvement Credit. Ensure all qualifying HVAC upgrades are listed and accurately calculated.

Tax Credit Limits for HVAC Upgrades

• 30% Credit: Homeowners can claim a 30% tax credit for the purchase and installation of qualifying HVAC systems, including air conditioners, heat pumps, and high-efficiency heating systems.
• Annual Limit: The tax credit for HVAC and related improvements is capped at $1,200 per year for all qualifying energy-efficient home upgrades combined (this includes things like insulation, windows, and smart thermostats).

Frequently Asked Questions

1. Can I claim HVAC upgrades for rental properties?
No, Form 5695 applies only to primary and secondary residences, not rental properties.

2. Do I need to submit receipts with IRS Form 5695?
No, but homeowners should keep receipts and supporting documentation to verify their claims in case of an IRS audit.

3. Can I claim expenses from previous years?
Form 5695 is for the current tax year. If the HVAC upgrade was made in a previous year, homeowners must file an amended return to claim the credit for that year.

4. Can I claim multiple HVAC upgrades in one year?
Yes, as long as the total tax credit claimed for all energy-efficient home improvements doesn’t exceed the annual cap of $1,200.

Final Tips for Homeowners

• Consult a tax professional: They can help ensure you're claiming the full credit and meeting the eligibility requirements.
• Keep all records: Make sure to retain all invoices, receipts, and supporting documents for the HVAC system purchase and installation.
• Maximize savings: Combine HVAC upgrades with other energy-efficient improvements, such as insulation, windows, and doors, to reach the $1,200 annual credit cap.