Residential Energy Credit for installation of Fireplace

[Deuce1314]

Dear Turbotax Community

A client of mine included a Manufacturers Certificate for a hearth product (Fireplace) eligible for a Tax Credit with his tax workpapers. The cost of the entire Fireplace installation including parts and labor was $7,194 and the Manufacturers Certificate stated that the Fireplace is eligible for the energy credit as a biomass burning stove for purposes of Section 25C of the Internal Revenue Code. When I entered the applicable information in Turbotax, it calculated an energy credit of $2,158 (30%) on Form 5695 which carried forward to Form 1040 at that amount. 

I have a few questions relating to this credit- my reading on the topic seemed to indicate that the credit was 26% for 2022 and was not increased to 30% until 2023. Also, I was under the impression that Residential Energy Credits were non-refundable but the $2,158 credit on the Return above increased the refund that was already present on the Return prior to the credit.

Thanks 

[DanaB27]

The 2022 Inflation Reduction Act extended and modified the existing energy credit through 2034, and modified the applicable credit percentage rates. Therefore, the credit is 30% for property placed in service after December 31, 2021, and before January 1, 2033. Please see Residential Clean Energy Credit for additional information.

Yes, the credit is non-refundable which means it only can reduce your tax due to $0 and the unused credit is carried forward. It seems you had still some tax due on line 18 of Form 1040 and therefore you were able to use some of the credit and your refund increased.

Please see Energy Tax Credit: Which Home Improvements Qualify? for additional information.

[Deuce1314]

Thank you Dana- the Tax Credit Certificate Form from the Manufacturer lists 10 specific Wood Stove and Wood Insert Products. The Wood Insert which is listed on that form can be traced to the Installers Invoice ($3,389 cost) but there are other items on the Invoice for different parts and liners used to complete the installation. Is the credit available for only the specific part listed on the Manufacturers Certificate?

[DanaB27]

The instructions for Form 5695 state "You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, biomass fuel property, and fuel cell property. Include any labor costs properly allocable to the onsite preparation, assembly, or original installation of the residential energy efficient property and for piping or wiring to interconnect such property to the home." Therefore, the other parts and labor costs used to complete the installation will be included for the credit.