CTC VS Heat Pump Water Heater Credit

[Lakie7]

I have seen this question asked numerous times and the answer is not very clear. I understand that there is an ordering list for tax credits. My water heater has died and I want to take advantage of the Hot Water Heat Pump credit. I will need to do this soon. Will this non refundable credit be applied before or after the CTC. I see others saying it isn’t done that way and why I am confused.

• Foreign tax credit from 1116(line 47 on 1040)
• Dependent care credit from 2441 (line 48 on 1040)
• Credit for the elderly or disabled from schedule R (line 53 on 1040)
• Credit from general business credit from 3800 and AMT credit 8801 (line 53 on 1040)
• Lifetime learning credit and American opportunity credit (nonrefund part) from 8863 (line 49 on line 1040)
• Retirement savings contribution credit from 8880 (line 50 on 1040)
• Nonbusiness energy property credit from 5695, part II (line 52 on 1040)
• Qualified electric vehicle credit from 8834 (line 53 on 1040)
• Alternative motor vehicle credit from 8910 (line 53 on 1040)
• Qualified plug-in electric drive motor vehicle credit from 8936 (line 53 on 1040)
• Line 12 of line 11 worksheet for child tax credit
• Mortgage interest credit from 8396 (line 53 on 1040)
• Credit for qualified adoption expense from 8839 (line 53 on 1040)
• DC Columbia first-time homebuyer credit from 8859 (line 53 on 1040)
• Residential energy efficient property credit from 5695 part I (line 52 on 1040)

[xmasbaby0]

You are very confused about the line numbers on Form 1040.   I think you are getting those line numbers from the various Schedules, worksheets, etc.---not from the  Form 1040.   Please look at a Form 1040 so you can see the line numbers that are on it.

https://www.irs.gov/pub/irs-pdf/f1040.pdf

[xmasbaby0]

On Form 1040----

CTC is on line 19

The information from Schedule 3----which will include the energy credits from Form 5695-- will be on line 20

[NCperson · Accepted solution]

@Lakie7 what is going to occur is the energy credit will be applied first and then CTC.  As you note these are non-refundable credits, so Line 22 can't be less than zero.

However, the additional child tax credit (which is a refundable credit) calculation is the LOWER of these three statements:

1) 15% of your earned incomes that exceeds $2500

2) $1700

3) $2000 per child less the CTC credit from line 19. 

so if your concern is that your energy credit will 'squeeze out' CTC, you'll get the remaining credit on Line 28 as the "additional CTC"