I never received energy tax credit in the past. I installed a high efficiency water heater (boiler) in 2022 for $2300. TT shows zero energy tax credit. Why no credit?

[Zagazig44]

TT explanation shows that I should get a percentage 0f the $2,300 back. What am I doing wrong?

[PattiF]

The residential energy credit is nonrefundable, which means that you won't have a refund if you don't owe any taxes. The credit can only be applied against what is owed on your tax return.  The credit will carry over any unused amount of the tax credit to the following tax year.

If you don't have a tax liability you will not receive the credit and any refund will not become larger because of this credit.

[Zagazig44]

Thanks much! One point, though!

Shouldn't TT indicate the amount of credit to be carried over to next year (if I have no tax liability this year) rather than stating “zero” energy credit?

[JohnW152]

This really depends on what type of water heater you've installed.

If you've installed solar water heating equipment, you'd qualify for the Residential Clean Energy Credit in Part I of Form 5695, which is non-refundable, but can be carried over if not used during the tax year.

However, if you've installed an electric heat pump water heater -- which it sounds like you may have -- this would be entered as an Energy Efficient Home Improvement Credit, which is claimed on Part II of the form. The credit would be limited to $300, and can't be carried over.

Please see the IRS' Instructions for Form 5695 for more information.