How to claim the Energy Efficient Home Improvement Credit for a second home.
I'm looking to claim the Energy Efficient Home Improvement Credit for a second home which I reside in some of the year and I installed electric heat pumps. If you begin the Home Energy workflow, if you select the option that the improvements are not for your main home, the only options to claim are on Part 1 of form 5695 (Qualified solar electric property costs, Qualified solar water heating property costs, Qualified small wind energy property costs, Qualified geothermal heat pump property costs).
The options in Part 2 are not available if you select that the improvements are not for you r main home, but if you look at the IRS documentation, some of the options in Part 2 are eligible for a second home.
Q1. What type of residence is required for the credit? For example, is the credit available for a home rented by the taxpayer or for a second home? (updated Jan. 17, 2025)
A1. A taxpayer claiming the credit for exterior windows or skylights, exterior doors, and insulation materials or systems (including air sealing materials or systems) must have installed such property in a home located in the United States that is owned and used by the taxpayer as the taxpayer’s principal residence. Due to the home ownership requirement, a taxpayer who rents the home in which such property is installed would not be entitled to the credit. Due to the principal residence requirement, a taxpayer who installs such property in the taxpayer’s second home would not be entitled to the credit.
A taxpayer claiming the credit for electric or natural gas heat pump water heaters; electric or natural gas heat pumps; central air conditioners; natural gas, propane, or oil water heaters; natural gas, propane, or oil furnaces or hot water boilers; biomass stoves or boilers; oil furnaces or hot water boilers; and improvements to, or replacements of, panelboards, sub-panelboards, branch circuits, or feeders must have installed such property in a home located in the United States and used as a residence by the taxpayer. In this case, the taxpayer may rent the home in which such property is installed, and such property may be installed in the taxpayer’s second home.
Best Answer
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We're looking further into the issue. I'll update this answer once I hear back about this issue. Thank you for bringing this up.
UPDATE:
We appreciate your help in bringing this issue to our attention. The items on Form 5695, Part II, Section B don't need to be for your main home. We are working to fix this in our software. The fix should hopefully be available by the end of next week.
Answers
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Hello Thegreatpeepee,
Thank you for the question and the IRS source. In this source from the IRS, Energy Efficient Home Improvement Credit, which talks about electric heat pumps, the section on "Who qualifies" the heat pump must be for your main home. Then the IRS defines, "Main Home" as, "Your main home is generally where you live most of the time."
This is why our software limits the credit options when you answer NO to the question, "Is this your main home?"
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The link above cites "in most cases," and the FAQ explicitly says a second home is allowed for electric or natural gas heat pumps. Is it possible to change to workflow to allow this case?
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I am having this issue as well. It does not allow anything other than lines 1-4 of form 5695 if you do main home or not (Edit: my mistake, main home works, as I found out it is on the next page after). In freetaxusa it is only "Enter any 2024 residential clean energy costs."
Part 2 "Energy Efficient Home Improvement Credit" is largely if not wholly skipped, some examples:
18 Insulation or air sealing material or system.
19 Exterior doors that meet the applicable Energy Star requirements
etc… basically lines 18-32
See for reference.
Please let me know when fixed.
