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Common questions about Form 5695 Residential Energy Credits in Lacerte

SOLVED•by Intuit•1438•Updated March 06, 2024

What's new for Form 5695 for tax year 2023:

Energy efficient home improvement credit: The nonbusiness energy property credit has changed to the energy efficient home improvement credit. The credit is extended to property placed in service through December 31, 2022. See here for more information.

Residential clean energy credit: The residential energy efficient property credit has changed to the residential clean energy credit. The credit rate for property placed in service in 2022 through 2033 is 30%. See here for more information.

To generate the Energy efficient home improvement credit:

  1. Go to Screen 38.2, EIC, Residential Energy, Other Credits.
  2. From the Sections select Energy Efficient Home Improvement Credit (5695)
  3. Complete the following applicable fields:
    • Under Section A - enter any Insulation, Exterior Doors, and Exterior Windows information.
    • Under Section B enter the Qualified Energy Property, Residential Energy Properties such as air conditioners, heaters and boilers and any Heat Pumps Biomass Stoves and Biomass Boilers.
    • Energy efficient home improvement credit (Form 5695)[O]
      • Using this field will override the credit amount and suppress the form from generating.

To generate the Residential clean energy credit:

  1. Go to Screen 38.2, EIC, Residential Energy, Other Credits.
  2. From the Sections select Residential Clean Energy Credit (5695)
  3. Complete the following applicable fields:
    • Solar electric property costs
    • Solar water heating property costs
    • Fuel cell property costs
    • Kilowatt capacity of fuel cell property (xx.xx)
    • Small wind property costs
    • Qualified geothermal heat pump property costs
    • Residential clean energy credit (Form 5695) [O]
      • Entering this field will override the credit amount and suppress the form from generating.

To generate the Residential Energy Efficient Property Credit in tax year 2022 and prior:

  1. Go to Screen 38.2, EIC, Residential Energy, Other Credits.
  2. Scroll down to the Residential Energy Efficient Property Credit (5695) section.
  3. Complete the following applicable fields:
    • Solar electric property costs (Form 5695, Part I, line 1)
    • Solar water heating property costs (Form 5695, Part I, line 2)
    • Fuel cell property costs (Form 5695, Part I, line 8)
    • Kilowatt capacity of fuel cell property (xx.xx) (Form 5695, Part I, line 10)
    • Small wind property costs (Form 5695, Part I, line 3)
    • Qualified geothermal heat pump property costs (Form 5695, Part I, line 4)
    • Residential energy efficient property credit (Form 5695) [O]
      • Entering this field will override the credit amount and suppress the form from generating.

To generate the Nonbusiness Energy Property Credit in tax year 2022 and prior:

  1. Go to Screen 38.2, EIC, Residential Energy, Other Credits.
  2. Scroll down to the Nonbusiness Energy Property Credit (5695) section.
  3. Complete the following applicable fields:
    • Enter a 1 in 1= improvements and costs were not made to main home located in U.S. (Form 5695, Part II, line 17a)
    • Enter a 1 in 1= some expenses used in construction (Form 5695, Part II, line 17c)
    • Insulation or system reducing heat loss or gain (Form 5695, Part II, line 19a)
    • Exterior windows or skylights (Form 5695, Part II, line 19d)
    • Exterior window costs from [first prior year] (Form 5695, Part II, line 19f)
    • Exterior window costs from [second prior year] (Form 5695, Part II, line 19f)
    • Exterior window costs from [third and fourth prior year] (Form 5695, Part II, line 19f)
    • Exterior window costs from [fifth and sixth prior year] (Form 5695, Part II, line 19f)
    • Exterior doors (Form 5695, Part II, line 19b)
    • Qualified metal or asphalt roof (Form 5695, Part II, line 19c)
    • Energy-efficient building property (Form 5695, Part II, line 22a)
    • Qualified furnace or hot water boiler (Form 5695, Part II, line 22b)
    • Circulating fan used in furnace (Form 5695, Part II, line 22c)
    • Qualified cost paid by other joint owner (after maximum dollar limitation)
      • This entry causes the limitation on line 6 of Form 5695 to be prorated.  This proration doesn't have to be done by spouses filing a joint return.
    • Nonbusiness energy credit (Form 5695)[O]
      • Using this field will override the credit amount and suppress the form from generating.

Form 5695 doesn't have a location to reflect the amount of the credit that has already been used. Therefore, it's suggested that the credit be manually reduced. A note can be made in Screen 47, Notes to track the reason and amount of the adjustments.

Per the Form 5695 instructions for line 22a:

"A stove that uses the burning of biomass fuel to heat your home or heat water for your home that has a thermal efficiency rating of at least 75%. Biomass fuel is any plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers."

To enter the amount for Form 5695, line 22a:

  1. Go to Screen 38.2, EIC, Energy Residential, Other Credits.
  2. Scroll down to the Nonbusiness Energy Property Credit (5695) section.
  3. Enter the amount in the Energy-efficient buildings property field.

Lacerte will only check the Yes box on line 7a when there are qualified fuel cell property costs.

To enter qualified fuel cell property costs:

  1. Go to Screen 38.2 EIC, Residential Energy, Other Credits.
  2. From the left Sections choose Residential Energy Efficient Property Credit (5695).
  3. Enter the Fuel cell property costs.
  4. Ente the Kilowatt capacity of fuel cell property (xx.xx).

Lacerte will now check Yes on 7a and complete lines 7a-11 of the 5695.

Form 5695 won't generate if the credit amount has been overridden.

To remove the override and generate Form 5695:

  1. Go to Screen 38.2, EIC, Residential Energy, Other Credits.
    • This is Screen 39 in 2013 and prior years.
  2. Scroll down to the Nonbusiness Energy Property Credit  (5695) section.
  3. Remove the entry from Nonbusiness energy credit (Form 5695) [O] (if any).
  4. Scroll down to the Residential Energy Efficient Property Credit (5695) section.
  5. Remove the entry from Residential energy efficient property credit (Form 5695) [O] (if any).
  6. Enter the applicable amounts to generate Form 5695.

If no overrides were entered:

  • Make sure that Form 1040 is generating a tax due. The residential energy credits cannot be taken for returns that have no tax due. Although, this shouldn't prevent Form 5695 from generating.
  • Make sure that the nonbusiness energy property credit wasn't taken in prior years. Complete line 18 worksheet to determine whether or not the total of the credits on line 8 is $500 or more, you generally can't take this credit if this is the case.

 

See the IRS Instructions for Form 5695 for more information.

Limitation and credit amount details are also available for each field using the F1 Help feature in Lacerte. To use this feature, place your cursor in a field and click your F1 function key, available on your keyboard. This help function is available throughout the program.

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