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Energy Tax Questions

Individuals who have made energy efficient improvements to their home have had many questions about energy efficient tax credits. Uncertainties of what the Energy Tax Act is or how to claim energy tax credits often lead to questions like the ones answered below.

What is the Energy Tax Act?

The Energy Tax Act is a law passed as part of the National Energy Act. The goal of this act was for the community to shift from oil and gas supply toward conservation of energy. It was to promote fuel efficiency and renewable energy via taxes and tax credits.

The Energy Tax Act gives income tax credits to private residents that utilized solar, wind, or geothermal sources of energy. The law also allowed tax credits to business for use of renewable energy equipment. Read below where Experts have answered many questions pertaining to Energy Tax.

Do I get an energy tax credit for using a gas log fireplace?

The federal tax credits for energy efficiency covers energy-efficient improvements to individual homeowner’s existing homes. The American Recovery and Reinvestment Act (ARRA) pushed the energy tax credit to 30 percent of the cost of the qualifying energy efficient improvement. However, gas fireplaces are not currently found on the qualifying list. The list can be found online at

How do I apply for a federal energy tax credit on my federal income tax for five new windows I purchased and installed myself? The energy performance rating on the windows is a U - Factor of 0.3.

When an individual buys energy-efficient windows, the purchase typically includes a certificate that says that it is eligible for a deduction. This certificate needs to be kept for the individual’s personal records. If the windows did not come with a certificate, they might not qualify for a tax credit. However, the individual can still try and claim the credit on their income tax return by filing IRS Form 5695.

How are energy tax credits applied to a person’s income tax?

Energy tax credits up to $1500 given for energy-efficient additions to a person’s home are deducted from the final tax figure that the person has to pay the government. These credits are not allowed when you calculate the Alternative Minimum Tax but are typically claimed by filling out IRS Form 5695 and transferring it to IRS Form 1040.

If you don’t use all your energy tax credits, will they be carried over to the next year?

There is generally only one energy tax credit that can be carried over to the next year. This is the Residential Energy Efficient Property credit. It covers items such as a geothermal heat pump, fuel cells, solar water heating, solar electric and small wind energy. It has a 30% with no limit credit. However, the credit that covers insulation, windows and doors which is a Personal Energy Property Credit doesn’t have a carry forward.

While the questions above may have answered some of your own queries on energy tax, there could be other questions that are unique to your own case. These could range from understanding how to claim credit on a particular energy-efficient product to what qualifies for an energy tax credit, the effects of imposing energy tax and so on. In times like this, clarify your doubts with Tax professionals to get quick and insightful answers that can help your case.
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