Energy Efficient Home Improvement Credit

[tenorita]

I had an Electric Heat Pump installed in 2023 to replace my old kerosene monitor.  I entered the expense under Energy Efficient Building Property.  My understanding is that I can get up to a 30% credit, but it's only applying $300.00.  Is that correct, or has TurboTax just not gotten up to date with the 2023 rulings?

[DoninGA · Accepted solution]

The Form 5695 Residential Energy Credits for tax year 2023 has not yet been finalized in TurboTax.

The Form 5695 is scheduled to be available in TurboTax on 02/07/2024 (subject to change).

Go to his TurboTax website for forms availability - https://form-status.app.intuit.com/tax-forms-availability/formsavailability?albRedirect=true&product...

[xmasbaby0]

 Click Review to see if you are missing some forms needed in order to e-file.

Many federal and state forms are not yet available.  Check here for form availability. The dates are subject to change.

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[huskers823]

This rule has been updated, don't know when it was finalized, but the IRS has the 2023 rule published, has anyone heard whether or not TurboTax is going to meet today's date (what they list) for getting this straight.  I just received my last other form so if not I'll be moving platforms in an aggravated mood that will likely prevent me from coming back to TT (which is a shame because I've used it for years and in general love it). 

[LeticiaF1]

Updates are still being applied to the software. We recommend updating or logging back into your software tomorrow and then proceeding with filing your tax return.

[Rrmcc10]

It appears the energy efficient home improvement credit is being treated like a refundable credit currently on TurboTax. My refund amount is including the full credit. I can’t find anywhere on the IRS website that this is the correct treatment. It is a nonrefundable credit. Am I missing something?

[Vanessa A]

You are correct it is a nonrefundable credit.  However, if you paid in taxes either through estimated payments or withholdings from your wages,  the credit would reduce your tax liability which would result in you getting a refund of money you paid in.

A non refundable credit is just a credit that will not give you cash back that you did not pay in.

One other potential thing that could be happening, is if you have the child tax credit that is also non refundable, it could be being reduced, so the energy credit is used and then you could be getting the refundable portion of the additional child tax credit.  This would result in getting more money back than you paid in.  

[Rrmcc10]

Thank you for that response. I do not have children so I did not claim that credit. I had no estimated tax payments in 2023 and my wages were not withheld for my home improvement. My employer was not aware I was making improvements and I did not instruct them to withhold more from my wages. When I click the explain my refund button in TurboTax I get an error message.

[Vanessa A]

No, I didn't mean they would be withheld for your home improvement, I meant in general.  

Say you earned $50,000 and your employer withheld $9,000.  You have a tax liability before the credit of $10,000 so you would have to pay in $1,000.  However, you get an energy credit for $3,00.  This reduces your tax liability to $7,000 so now instead of owing $1,000 you are getting a refund of $2,000.  You still have a tax liability of $7,000, but since your employer withheld $9,000, you are getting a refund of the extra $2,000.

Look at line 16 of your return to see your original tax liability,  then look at line 20 for your schedule 3 credits (this is where the energy credits are) then look at line 24 for your total tax after non refundable credits then compare this number to line 25a for your withholdings from your wages.   If line 25a is greater than line 24, this would result in a refund of your taxes withheld. 

[Rrmcc10]

I had a small estimated federal refund before entering the energy tax credit information into TurboTax. The estimated refund increased by the amount of the credit after I entered it. I appreciate your explanation, but it still doesn’t make sense to me.

[DawnC]

A nonrefundable credit can't reduce your tax liability past zero.   Even with the energy credit, your tax liability is still more than zero.   But because you had taxes withheld from your paychecks, you are getting more of those withheld taxes back.   But you are not getting them all back, so you still have a tax liability - - which means you can still benefit from non-refundable credits.   

[huskers823]

Let me try it this way.  If you look at your W2 and federal taxes withheld are more than the $1,200 (say the $9,000 mentioned above), then you get $1,200 added to your small refund you mentioned above.  Non-refundable doesn’t mean that you can’t get a refund at all.  A refund before credits (which you said you were getting a small one) is the government returning your money that was withheld (W2 listed) in excess of what it turns out you owe.  Some credits allow for you to get a “refund” even if that number ends up zero.  As long as the number on your W2 exceeds $1,200 you will get $1,200 added to your refund.  If it is say only $1,000 you should see only $1,000 added to your refund and the $200 would then not appear.

[ehshoaf49]

As of February 9, the IRS instructions for 5695 allow the credit for certain heat pumps to be taken on a home within the US, not necessarily the main home. In fact, the form asks for addresses of all homes where the equipment was installed. However, TurboTax still will not allow the form to be completed unless it is checked that the improvement is in the main home.

TurboTax website says the form is ready, but the program appears to be mistaken. The IRS clearly separates this credit in Part II of 5695 from the requirement to be in the main home. How can we get TurboTax to recognize the problem and follow the IRS instructions?

[Vanessa A]

Would you be able to send me a diagnostic copy of your return so we can further investigate this issue?  You can do this by taking the following steps:

TurboTax Online

• Tools
• Tax Tools
• Share My File with Agent
• then note the token number and respond to me with the number

TurboTax Desktop

• Online
• Send Tax File to Agent
• Send
• Then respond with the token number to this message

The diagnostic copy does not include any of your personal info, it just includes numbers and forms so we can help solve the issue. 

[ehshoaf49]

Vanessa, please understand that the problem is TurboTax will not let me claim the heat pump credit because it says I must check the heat pump is in my main home whereas the IRS instructions for Part II of form 5695 require only that the home be in the United States for that particular credit. I don't understand that reviewing my return will help since TurboTax still asks if the improvement is in my main home. When I say no, it tells me it can't get me that credit. The IRS instructions are different from what TurboTax is doing.