2018 Residential Clean Energy Credit
For 2018, the Residential Clean Energy Credit is 30% (Credit rate) and $500 (Fuel cell credit limit, per half kilowatt).
Effective 2018-01-01Source: 2018 Instructions for Form 5695 (IRS)Verified 2026-08-29
Compared with 2017
Every figure on this page is unchanged from 2017.
| Item | 2017 | 2018 | 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 qualifying energy-saving improvements to their main home located in the United States in 2018
What changed this year, and why
The 2018 residential energy efficient property credit allows a 30% credit on the cost of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, and fuel cell property. The fuel cell credit is limited to $500 for each one-half kilowatt of capacity of the property. These figures are the same as for 2017. The credit is claimed on Form 5695.
Common questions
- Who can claim the residential energy efficient property credit?
- You may be able to claim the credit on your main home if you paid costs for qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, or fuel cell property installed on or in connection with the home. Labor costs for onsite preparation, assembly, or original installation, and piping or wiring to interconnect the property to the home, are included.
What happens when the credit is bigger than your tax
If your Residential Clean Energy Credit for 2018 is larger than your tax liability, you do not lose the unused portion. The unused amount can be carried forward to your 2019 tax return. This means you will apply the remaining credit against the tax you owe in that future year. The carryforward allows you to eventually use the full credit even if your tax bill in 2018 is not high enough to absorb it all. You must still file Form 5695 for 2018 to report the credit, even if you cannot use any of it in the current year.
If you can't use all of the credit because of the tax liability limit (that is, line 14 is less than line 13), you can carry the unused portion of the credit to 2019.
2018 Instructions for Form 5695 (IRS)
Business use of the property can cut the credit
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. This means that when business use exceeds a certain threshold, the full cost of the property cannot be claimed. Instead, you must split the expenses and claim a credit only on the share tied to personal use. For instance, if a solar water heater is used mostly for business, only the personal-use percentage of its installation cost counts toward the Residential Clean Energy Credit. The 30% credit rate then applies only to that reduced cost figure. This allocation rule applies to both the residential energy efficient property credit and the nonbusiness energy property credit.
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.
2018 Instructions for Form 5695 (IRS)
A cost counts when installation is finished, not when you paid
An item is treated as paid when the original installation of that item is complete. If the costs are tied to a reconstruction of your home, the costs are treated as paid when your original use of the reconstructed home begins. This rule means the date on which you make payment or sign a contract is not what determines the tax year for the credit. Only when the installation is finished and the property is ready for its intended use does the expenditure count. For a newly constructed home, the same principle applies under the residential energy efficient property credit, with costs treated as paid when your original use of the constructed home begins.
Costs. 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.
2018 Instructions for Form 5695 (IRS)
Utility rebates come off the cost first
When you receive a subsidy from a public utility to purchase or install an energy conservation product, that subsidy affects how much credit you can claim. If the subsidy was not included in your gross income, you must reduce your cost for the product by the subsidy amount before calculating your credit. This reduction also applies if a third party, such as a contractor, received the subsidy on your behalf. The rule prevents you from claiming a credit on money you did not actually pay for out of pocket. By lowering your eligible cost base, the subsidy directly reduces the 30% credit you would otherwise receive, so it is important to account for any rebates or incentives from utility companies when preparing your credit calculation.
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.
2018 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. The fuel cell must be placed at the residence where you live most of the time. Unlike solar panels or geothermal heat pumps, which can qualify even if installed on a second home or vacation property, the fuel cell credit is limited strictly to your primary residence. A temporary absence due to illness, education, business, military service, or vacation does not change which home is considered your main home. This means if you install a fuel cell system at a property that is not your primary residence, those costs cannot be included in your Residential Clean Energy Credit calculation, even if the home is located in the United States.
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.
2018 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.
2018 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.