Yes. As long as the water heater meets the specific energy efficiency guidelines. See the IRS instructions for details.
You may also include the amounts paid for the assembly, preparation and installation. The maximum dollar amount for energy-efficient building property is 10% with a credit limit up to $300.
The residential energy property credit is nonrefundable. A nonrefundable tax credit allows taxpayers to lower their tax liability to zero, but not below zero.
To claim the credit:
- Open (continue) your return
- Inside TurboTax, search for this exact phrase including the comma and spaces: 5695, residential energy credit
- Select the Jump to link in your search results.
- At the bottom of the Energy-Saving Home Improvements screen, answer Yes, then select Continue.
- Follow the instructions to enter your energy-saving improvement costs.
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