What this line means
The combined total of all energy-efficient home improvement costs you paid during the tax year. Add together building envelope components (line 15), residential energy property like heat pumps, central AC, water heaters, furnaces, and boilers (lines 16 through 17), and home energy audits (line 17a). 1
The total annual credit cap is $3,200, composed of sub-limits: $1,200 for envelope components and $2,000 for heat pumps, heat pump water heaters, and biomass stoves. The home energy audit credit is capped at $150 per year. 2
Does this apply to you?
- You made energy-efficient improvements to your principal residence during the tax year
- You entered costs on any of lines 15 through 17a on Form 5695
- You installed a combination of insulation, windows, doors, heating equipment, or had an energy audit
Easy to overlook
Home energy audits qualify for their own $150 credit A qualified home energy audit — where a certified auditor inspects your home and recommends efficiency improvements — costs between $200 and $600 in most areas. The credit covers up to $150 of that cost on line 17a. Many homeowners skip the audit credit because the amount seems small, but it adds to your total. 1 IRS Form 5695 instructions — Line 18
Heat pumps get a separate $2,000 bucket The $1,200 general limit does not apply to heat pumps, heat pump water heaters, and biomass stoves. These items have their own $2,000 annual limit. You can claim $1,200 for windows and insulation plus $2,000 for a heat pump in the same year, reaching the full $3,200 cap. Homeowners who assume the $1,200 limit covers everything shortchange themselves. 2 IRS Publication 17 — Energy efficient home improvement credit
Watch out for this
The sub-limits are strict and can be confusing. Here is how the $3,200 annual cap breaks down:
- $1,200 maximum for building envelope components (insulation, windows, doors, skylights)
- Within that $1,200: exterior doors are capped at $250 each and $500 total; windows and skylights are capped at $600
- $2,000 maximum for heat pumps, heat pump water heaters, and biomass stoves
- $150 maximum for home energy audits (counted within the $1,200 bucket)
If you spend $5,000 on windows and $8,000 on a heat pump, your credit is not 30% of $13,000. It is $600 (window cap) plus $2,000 (heat pump cap) for a total credit of $2,600. 1
Footnotes
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IRS Form 5695 Instructions, Residential Energy Credits. https://www.irs.gov/pub/irs-pdf/i5695.pdf ↩ ↩2 ↩3
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IRS Publication 17, Your Federal Income Tax, Energy Efficient Home Improvement Credit. https://www.irs.gov/pub/irs-pdf/p17.pdf ↩ ↩2