Form 5695 (2019) – Residential Energy Credits Checklist
Purpose
Form 5695 allows taxpayers to claim two nonrefundable residential energy credits for the 2019 tax year. Part I covers the Residential Energy Efficient Property Credit, which provides a 30% tax credit for qualified costs of solar, wind, geothermal, and fuel cell property. Part II addresses the Nonbusiness Energy Property Credit, which offers 10% of qualified energy efficiency improvements plus specific residential energy property costs, subject to a $500 lifetime cap with a $200 lifetime limit specifically for windows.
Preparation Steps
Step 1: Verify Your Filing Status and Form Requirements
Confirm you are filing Form 1040, 1040-SR, or 1040-NR for 2019. Both Part I and Part II credits must be reported on Schedule 3 (Form 1040/1040-SR), line 5, or Form 1040-NR, line 50. Attach the completed Form 5695 to your tax return.
Step 2: Gather Documentation for Part I Renewable Energy Property
Collect all invoices, contracts, and receipts for qualified solar electric property, solar water heating systems, small wind energy equipment, or geothermal heat pump installations placed in service at your home during 2019. Verify each property is located in the United States and calculate the total costs, including labor for on-site preparation, assembly, original installation, and interconnection wiring or piping.
Step 3: Document Qualified Fuel Cell Property Installations
If you installed a qualified fuel cell property in 2019, confirm it was installed on or in connection with your main home in the United States. Record the complete address of your main home, document all qualified costs, including installation labor, and note the kilowatt capacity to apply the $500-per-half-kilowatt limitation on line 10.
Step 4: Retrieve Your 2018 Carryforward Amount
Locate your 2018 Form 5695, line 16, and enter the carry-forward amount on line 12 of your 2019 Form. This represents unused Residential Energy Efficient Property Credit from prior years that can be carried forward indefinitely until it is fully utilized.
Step 5: Calculate Your Part I Credit Tax Liability Limitation
Complete the Residential Energy Efficient Property Credit Limit Worksheet using your 2019 tax return before credits from Form 1040 or 1040-SR, line 12b, or Form 1040-NR, line 45. This calculation determines the maximum credit you can claim based on your tax liability, which you will enter on line 14.
Step 6: Verify Main Home Eligibility for Part II Credits
Confirm that all qualified energy efficiency improvements and residential energy property costs relate to your main home located in the United States. Your main home is where you live most of the time. You cannot claim Part II credits for newly constructed homes or for improvements related to original construction, even if installed after you moved in.
Step 7: Calculate Qualified Energy Efficiency Improvements
On lines 19a through 19d, itemize costs for qualifying improvements, including insulation meeting 2009 IECC standards, exterior doors meeting Energy Star version 6.0 requirements, metal or asphalt roofs with Energy Star certification, and windows and skylights meeting Energy Star version 6.0 standards. Do not include labor costs for these building envelope components.
Step 8: Apply the Window Cost Limitation
On line 19e, note the preprinted $2,000 maximum cost figure for windows and skylights. If you claimed window expenses in any year before 2019, complete the Window Expense Worksheet to calculate your cumulative prior-year window expenses and enter this amount on line 19f. The difference determines your eligible window costs for the 2019 credit calculation.
Step 9: Document Residential Energy Property Costs
On lines 22a through 22c, list qualified residential energy property costs, including labor for onsite preparation, assembly, and original installation. Enter expenses for energy-efficient building property such as heat pumps, central air conditioners, and water heaters (maximum $300), qualified natural gas, propane, or oil furnaces or hot water boilers (maximum $150), and advanced main air circulating fans (maximum $50).
Step 10: Calculate Your Part II Lifetime Limitation
Complete the Lifetime Limitation Worksheet to determine your remaining credit availability under the $500 aggregate lifetime limit for all nonbusiness energy property claims across all tax years after 2005. If you previously claimed this credit in 2006, 2007, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, or 2018, you must subtract those amounts from the $500 maximum.
Step 11: Apply Part II Tax Liability Limitation
Complete the Nonbusiness Energy Property Credit Limit Worksheet to determine your tax liability ceiling for Part II credits. Enter the smaller of your calculated credit from line 28 or your tax liability limitation from line 29 on line 30.
Step 12: Calculate Any Part I Credit Carryforward to 2020
If line 15 is less than line 13, calculate your carry-forward amount on line 16 by subtracting line 15 from line 13. This unused Residential Energy Efficient Property Credit can be carried forward to 2020 and subsequent years without expiration. Part II credits cannot be carried forward, and any unused portion is forfeited.
Step 13: Complete Schedule 3 and Submit Your Return
Transfer the sum of lines 15 and 30 to Schedule 3 (Form 1040 or 1040-SR), line 5, or Form 1040-NR, line 50. Attach Form 5695 to your return and retain all manufacturer certifications, receipts, and supporting documentation for your records.
Year-Specific IRS Changes and Guidance
For 2019, the Nonbusiness Energy Property Credit was reinstated after expiring at the end of 2017, making it available for both 2018 and 2019. The credit maintains a $500 lifetime maximum across all tax years after 2005, with a specific $200 lifetime limit for window expenses. The line 19e maximum cost figure of $2,000 for windows represents the cost ceiling for credit calculation purposes in the current year.
The 30% credit rate for Part I renewable energy property remained unchanged for 2019 and was scheduled to remain in effect through December 31, 2019, under the law as it existed on the 2019 filing date. Properties qualifying for this credit include solar electric systems, solar water heating systems, small wind energy systems, geothermal heat pumps, and fuel cell installations.
Part II nonbusiness energy property credits are subject to a permanent $500 lifetime maximum across all tax years after 2005, with windows having an additional $200 lifetime credit limit. Unlike Part I credits, unused Part II credits cannot be carried to future years. Any credit amount exceeding your tax liability limitation after applying line 27 is permanently forfeited.
The 2019 Form 5695 instructions require you to specify your main home address on lines 7b and 17b for both Part I fuel cell property and Part II claims. The IRS restricts credits to one main home per taxpayer and requires confirmation that no Part II improvements were construction-related to prevent mixing original construction costs with post-occupancy efficiency upgrades.
Qualification standards for Part II improvements reference the 2009 International Energy Conservation Code for insulation materials and Energy Star version 6.0 for doors, windows, and skylights. The 2019 instructions did not update these standards from prior years, meaning products certified under these historical standards remained valid for 2019 claims.
For Part II residential energy property on line 22, revised standards apply to electric heat pump water heaters and natural gas, propane, or oil water heaters. These heaters must meet Uniform Energy Factor requirements rather than the previous energy factor standards. Electric heat pump water heaters must have a Uniform Energy Factor (UEF) of at least 2.2, while natural gas, propane, or oil water heaters require a UEF of at least 0.82.
If you claimed the nonbusiness energy property credit on both 2018 and 2019 returns, you must complete your 2018 Form 5695 first due to lifetime limitations on both the overall credit and window expenses. Most taxpayers claiming 2018 credits after the law’s reinstatement needed to file amended returns using Form 1040-X.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
