2016 Residential Clean Energy Credit
For 2016, the Residential Clean Energy Credit is 30% (Credit rate) and $500 (Fuel cell credit limit, per half kilowatt).
Effective 2016-01-01Source: 2016 Instructions for Form 5695 (IRS)Verified 2026-08-29
Compared with 2015
Every figure on this page is unchanged from 2015.
| Item | 2015 | 2016 | Change |
|---|---|---|---|
| Credit rate | 30% | 30% | +0% (+0.0%) |
| Fuel cell credit limit, per half kilowatt | $500 | $500 | +$0 (+0.0%) |
Who it applies to
Taxpayers who made qualified energy saving improvements to a home in the United States in 2016
What changed this year, and why
The Residential Energy Efficient Property Credit for 2016 allows homeowners to claim a credit based on the cost of qualified energy-saving improvements to their homes.
Common questions
- What is the credit rate for the Residential Energy Efficient Property Credit?
- The credit rate is 30% of the cost of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, and fuel cell property.
- Is there a limit on the fuel cell credit?
- Yes. The credit for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.
What happens when the credit is bigger than your tax
If the credit you calculate on the Residential Clean Energy Credit is larger than your tax liability for 2016, you do not lose the difference. The unused portion - amounts that could not be applied because your tax liability was too small - may be carried forward to the following year, which is 2017. You must still file the form for 2016 even if you cannot use any of the credit at all in that year. This carryforward rule lets you spread the benefit of the credit over more than one tax year, which is useful when a large installation produces a credit that exceeds what you owe in a single year. The carryforward applies only to the part of the credit that could not be used because of the tax liability limit.
If you can't use all of the credit because of the tax liability limit (line 14 is less than line 13), you can carry the unused portion of the credit to 2017.
2016 Instructions for Form 5695 (IRS)
Business use of the property can cut the credit
The 80 percent test applies to both the Residential Clean Energy Property Credit and the Nonbusiness Energy Property Credit. If less than 80 percent of the use of an item is for nonbusiness purposes, only that portion of the costs that is allocable to the nonbusiness use can be used to determine either credit. This means you must determine what percentage of the item's use is personal versus business, and only the nonbusiness portion of the cost qualifies for the 30 percent credit. The rule ensures that the residential credit is used only for property that is primarily personal in nature. You determine the split based on the actual use of the item during the tax year and apply the nonbusiness percentage to the total cost of the qualifying property before calculating the credit amount.
If less than 80% of the use of an item is for nonbusiness purposes, only that portion of the costs that is allocable to the nonbusiness use can be used to determine either credit.
2016 Instructions for Form 5695 (IRS)
A cost counts when installation is finished, not when you paid
For the Residential Clean Energy Property Credit, a cost is treated as paid when the original installation of the item is completed. If the item is part of a reconstruction of your home, the cost is treated as paid when your original use of the reconstructed home begins. For property connected with the construction of a home, the cost is treated as paid when your original use of the constructed home begins. These rules determine the tax year in which you may claim the credit, regardless of when you actually made payment to the contractor or supplier. You cannot claim the credit in an earlier year simply because you made a deposit or progress payment; the installation or original use must be complete first.
For purposes of both credits, costs are treated as being paid when the original installation of the item is completed, or, in the case of costs connected with the reconstruction of your home, when your original use of the reconstructed home begins.
2016 Instructions for Form 5695 (IRS)
Utility rebates come off the cost first
If you received a subsidy from a public utility for the purchase or installation of an energy conservation product and that subsidy was not included in your gross income, you must reduce your cost for the product by the amount of that subsidy before you figure your credit. The same rule applies if a third party, such as your contractor, receives the subsidy on your behalf. The purpose is to prevent a double benefit: you cannot claim a 30 percent credit on money that was effectively paid by the utility. Only your net out-of-pocket cost after subtracting the tax-free subsidy is eligible. If the subsidy was taxable and you reported it as income, you do not reduce your cost.
If you received a subsidy from a public utility for the purchase or installation of an energy conservation product and that subsidy wasn't included in your gross income, you must reduce your cost for the product by the amount of that subsidy before you figure your credit.
2016 Instructions for Form 5695 (IRS)
Fuel cells must be at your main home; solar need not be
Qualified fuel cell property costs are costs for qualified fuel cell property installed on or in connection with your main home located in the United States. Unlike solar electric, solar water heating, geothermal heat pump, and small wind energy property, which may be installed on a second home or other residence, the fuel cell credit is available only for property at your main home - the one you live most of the time. The fuel cell system must have a nameplate capacity of at least one-half kilowatt. The credit is $500 per half kilowatt of capacity. A temporary absence for illness, education, business, military service, or vacation does not change which home is your main home.
Qualified fuel cell property costs are costs for qualified fuel cell property installed on or in connection with your main home located in the United States.
2016 Instructions for Form 5695 (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2016 Instructions for Form 5695 (IRS)
- Credit rate
You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, and fuel cell property.
- Fuel cell credit limit, per half kilowatt
The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.