How to Claim the Energy Efficient Home Improvement Credit in Lacerte

As a CPA or accounting firm, you play a crucial role in helping homeowners navigate the complex world of tax credits. One such credit that can significantly benefit your clients is the Energy Efficient Home Improvement Credit. In this comprehensive guide, we’ll explore what this credit entails, why it matters, the relevant IRS codes and regulations, and how to input it in Lacerte.

What is the Energy Efficient Home Improvement Credit?

The Energy Efficient Home Improvement Credit encourages homeowners to make energy-saving upgrades to their properties. These improvements not only reduce energy consumption but also contribute to a greener environment. Here are the key points:

-Qualified Improvements: The credit applies to specific energy-efficient improvements, such as insulation, windows, doors, and energy-efficient heating and cooling systems.:

-Credit Amount: Starting from January 1, 2023, the credit equals 30% of certain qualified expenses. For improvements made before this date, refer to previous versions of Form 5695.:

-Annual Limits: The maximum annual credit varies based on the type of improvement: Up to $1,200 for energy property costs and certain home improvements (with specific limits for doors, windows, and home energy audits). Up to $2,000 per year for qualified heat pumps, biomass stoves, or biomass boilers.:

-No Lifetime Limit: Unlike some credits, there’s no lifetime dollar limit. Homeowners can claim the maximum annual credit every year until 2033.

IRS Codes and Regulations

To guide your clients effectively, follow these steps:

-Form 5695: File Form 5695, Residential Energy Credits Part II, with your tax return. Report the credit for the tax year when the property improvements are installed, not merely purchased.:

-Eligibility: The home must be located in the United States. It should be an existing home that you improve or add onto (not a new home). Generally, it must be your primary residence.

-Qualified Expenses: *Building envelope components (doors, windows, insulation) must meet energy efficiency standards.

*New systems and materials (not used) qualify.

-Insulation and air sealing materials must meet International Energy Conservation Code (IECC) standards.

Inputting the Credit in Lacerte

1.-Navigate to Screen 38.2:

-Go to “EIC, Residential Energy, Other Credits.”

-Select “Energy Efficient Home Improvement Credit (5695).”

2.-Complete the Applicable Fields:

-Enter information related to insulation, exterior doors, windows, and other energy-efficient improvements.

-For improvements made before 2023, refer to the Residential Energy Efficient Property Credit section.

3.-Generate Form 8908 (for business use):

-Go to Screen 34, General Business & Vehicle Credits.

-Select “Energy Efficient Home Credit (8908).”

-Enter the number of energy-efficient homes sold during the tax year.


By educating your clients about the Energy Efficient Home Improvement Credit, you empower them to save on taxes while contributing to a sustainable future. Feel free to share this detailed blog post with your audience, and let’s continue the conversation! If you have any specific questions or need further assistance, don’t hesitate to reach out.


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