IRS Form 5695 Instructions for 2018: A Comprehensive Guide
Are you a homeowner who has made energy-efficient improvements to your residence? If so, you may be eligible to claim the Residential Energy Credit using IRS Form 5695. This guide will walk you through the process of understanding, completing, and filing Form 5695 for the 2018 tax year.
Understanding the Residential Energy Credit
The Residential Energy Credit, also known as the non-business energy property credit, encourages homeowners to make energy-saving improvements to their primary residences. This credit can be claimed for 30% of the cost of eligible energy-efficient improvements, up to a maximum lifetime limit of $500 (or $200 for windows).
Eligible improvements include items such as solar electric systems, solar water heaters, small wind turbines, geothermal heat pumps, and energy-efficient windows, doors, and skylights. Keep in mind that the credit is subject to inflation adjustments and may have been reduced or eliminated in subsequent tax years.
Form 5695 Instructions: Getting Started
Before you begin, ensure you have all the necessary information and documents on hand. You'll need to know the cost of each eligible improvement, the date it was installed, and any applicable manufacturer's certification statements. Gather your receipts, invoices, and other supporting documentation to ensure accurate reporting.
Filling Out Form 5695
Now that you have your information ready, let's dive into the form itself. Form 5695 is a two-page document with nine numbered sections. We'll go through each section, providing guidance on how to complete it accurately.
Part I - Identification
- Enter your name, Social Security number (SSN), and spouse's SSN if filing jointly.
- Provide your mailing address and phone number.
Part II - Residential Energy Property Credit
This section is where you'll calculate the credit for each type of eligible improvement. You'll need to know the cost and installation date for each item. Use the following table to help you understand how to report each type of improvement:
| Eligible Improvement | Form 5695 Line | Credit Limit |
|---|---|---|
| Solar electric property | 1 | No limit |
| Solar water heating property | 2 | No limit |
| Small wind energy property | 3 | No limit |
| Geothermal heat pump property | 4 | No limit |
| Energy-efficient windows, doors, and skylights | 5 | $200 |
For each line, enter the cost of the improvement, the installation date, and any applicable manufacturer's certification statements. If the credit for a particular line exceeds the limit, carry the excess to the next line.
Part III - Credit Limitations
In this section, you'll calculate any limitations on your credit based on your income and the amount of credit you've already claimed in previous years. If your credit is limited, enter the limited amount on Form 5695, line 17, and carry any excess to the next line.
Part IV - Credit Calculation
In this final section, you'll calculate your total Residential Energy Credit by adding the credits from each line and subtracting any limitations. Enter the result on Form 5695, line 21, and carry it over to your Form 1040, line 53.
Additional Tips and Considerations
Here are some additional tips to keep in mind when completing Form 5695:
- Consult the official IRS instructions for Form 5695 for more detailed guidance.
- Keep accurate records of your energy-efficient improvements, including receipts, invoices, and manufacturer's certification statements, in case of an IRS audit.
- Be aware of the phaseout of the Residential Energy Credit for higher-income taxpayers. The credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) above $130,000 (or $260,000 for married filing jointly).
By following the instructions and guidance provided in this article, you should be well on your way to accurately completing and filing IRS Form 5695 for the 2018 tax year. As always, consult with a tax professional if you have any questions or concerns about your specific tax situation.
