Energy Efficient Home Improvement Credit - second home

[PatY]

Installed an electric heat pump in second home in 2023 but Turbotax will not allow the credit because it is not my main home.

IRS says under requirements: "central air conditioners; natural gas, propane, or oil water heaters; natural gas, propane or oil furnaces or hot water boilers; electric or natural gas heat pumps; electric or natural gas heat pump water heaters; biomass stoves or biomass boilers; and improvements to panelboards, sub-panelboards, branch circuits, or feeders: the home must be located in the United States and used as a residence by the taxpayer (includes renters); "

It does not say that it must be my main residence, only that I use it as a residence and is located in U.S. 

[AnnetteB6]

TurboTax is correct to only allow this credit to be claimed if the property is your main home.  There are only certain cases that allow any of the energy efficient home improvement credits to be claimed for a second home.  

Take a look at the following FAQ from the IRS website.  Question 1 addresses whether the home must be your main home to qualify for the credit.

Frequently asked questions about energy efficient home improvements and residential clean energy pro...

[PatY]

This is where I got the quote from. For the first and last bullet, it specifically states that it has to be the primary residence but for this bullet, it only says that it has to be in the U.S. and that you use it as a residence. In that case I qualify. I do not rent it and I do use it as a secondary residence. So to me, for these particular improvements, it does not have to be the primary residence.

[PatriciaV]

Is TurboTax presenting a message regarding this tax credit that explains why you aren't receiving the credit?

The program does allow you to answer "no" to the question about installing the heat pump in your main home. This answer limits how the credit is calculated but doesn't prohibit the credit calculation on Form 5695.

Note that you must have a tax liability in order to receive all or a portion of the credit. 

If you're using TurboTax for Desktop, you can review the calculations on Form 5695 using Forms Mode (What is Forms Mode?). With TurboTax Online, see these instructions: How do I preview my TurboTax Online return before filing?

[PatY]

Thank you for the reply. No, TT is not displaying a message and there is no prompt where I can answer "no". 

I now see that the form for TY 2023 will not be released by TT until Jan 31. Perhaps I need to wait and see if there are changes. I have looked at it in forms mode, will look again more closely. Thanks again.

[PatY]

In looking at the form more closely, it says in each section: "Caution: do not use this copy of form 5695 unless you are married filing jointly AND both you and your spouse owned and lived apart in separate main homes." I am filing jointly, and we both live in the same home. Is this possibly the problem?

[AnnetteB6]

It is best to wait until Form 5695 has been released and ready to file before trying to proceed with your return.  It is possible that there are still some changes to be made in the program to match the IRS instructions since there are some updates to these credits for 2023.

I did make note that the IRS instructions should allow the credit you are claiming even if it is not your main home.  Hopefully, TurboTax will be able to handle this situation as well after the form has been released.

@PatY 

[mpkrcl]

I am having the same issue, is there a solution?

[PatY]

I waited for the new update to Turbotax on Jan 31st which supposedly contained a new version of the form but I don't see any difference. 

[CatinaT1]

Here is the link for updates: Why are Home Energy improvements for my second home not qualifying for the Home Energy Credits?

[PatY]

The link for updates does not work.

[DawnC]

From the EE Home Improvement Credit - IRS.  You may claim the energy efficient home improvement credit for improvements to your main home. Your main home is generally where you live most of the time.

For the energy efficiency home improvement credit, the home must be:

• Located in the United States
• An existing home that you improve or add onto, not a new home

In most cases, the home must be your primary residence (where you live the majority of the year). You can't claim the credit if you're a landlord or other property owner who doesn't live in the home.

[mpkrcl]

In the instructions for Form 5695 from the IRS, it states "

Section B—Residential Energy Property Expenditures Lines 21a Through 21c

Line 21a.

 

To qualify for the credit, any qualified energy property installed on or in your home must be located in the United States. If you check the “No” box, you can't take the energy efficient home improvement credit for your residential energy property costs.

Line 21b.

 

To qualify for the credit, the qualified energy property must have been originally placed in service by you. If you check the “No” box, you can't take the energy efficient home improvement credit for your residential energy property costs.

Line 21c.

 

Enter the full address of each home where you installed qualified residential energy property."

Line 21a doesn't say it needs to be your primary home and line 21c allows you to enter one or more different addresses.   Why wouldn't this apply to my second home?  

[PatY]

In addition to the above response, the instructions state:

"Section B—Residential Energy Property
Expenditures
Residential energy property costs are costs of new qualified energy
property that is installed on or in connection with a home that you
used during 2023 located in the United States. Include any labor
costs properly allocable to the onsite preparation, assembly, or
original installation of the energy property. Qualified energy property
is any of the following.
• Certain electric or natural gas heat pump water heaters; electric
or natural gas heat pumps; central air conditioners; and natural gas,
propane, or oil water heaters.
• Natural gas, propane, or oil furnaces and hot water boilers.
• Certain biomass stoves and biomass boilers.
• Certain improvements or replacements of panelboards,
subpanelboards, branch circuits, or feeders.
To qualify for the credit, qualified energy property must meet
certain energy efficiency requirements. See Line 22a
through Line 25a and Lines 29a Through 29e, later, for
details."

Nowhere in lines 22a to 25a nor in lines 29a to 29e does it state that it must be your main home.

[AmyC]

Yes, those qualify. For a second home, the restrictions can be found in Q1 at Frequently asked questions about energy which states:

A1. The credits are available only for certain improvements made to second homes, and the credits are never available when the improvements are made to homes not used as a residence by the taxpayer. For example, landlords can never use these credits for improvements made to any homes they rent out but do not use as a residence themselves. However, if a taxpayer is renting a home as their principal residence and makes eligible improvements, a tax credit may be available to such tenant.

• For the Energy Efficient Home Improvement Credit, the following requirements apply:
  • exterior doors, windows and skylights, insulation materials or systems, and air sealing materials or systems: the home must be located in the United States and must be owned and used by the taxpayer as the taxpayer's principal residence [1];
  • central air conditioners; natural gas, propane, or oil water heaters; natural gas, propane or oil furnaces or hot water boilers; electric or natural gas heat pumps; electric or natural gas heat pump water heaters; biomass stoves or biomass boilers; and improvements to panelboards, sub-panelboards, branch circuits, or feeders: the home must be located in the United States and used as a residence by the taxpayer (includes renters); and
  • home energy audits: the home must be located in the United States and owned or used by the taxpayer as the taxpayer's principal residence (includes renters).
     
• For the Residential Clean Energy Property Credit, the following requirements apply:
  • solar water heating property expenditures, solar electric property expenditure, small wind energy property expenditures, geothermal heat pump property expenditures, and battery storage technology expenditures: the home must be located in the United States and used as a residence by the taxpayer (includes renters); and
  • fuel cell property expenditures: the home must be located in the United States and used as a principal residence by the taxpayer (includes renters).

Energystar is a government agency with details for every year and credit. 

You may be able to claim a credit for some improvements made to a second home in the U.S. that you live in part-time and do not rent to others. Fuel cell property claims for a second home do not apply.

To get the proper tax liability is the goal. If you meet the qualifications, you can mark it as main home to get through the program. There are too many changes and variations for every possibility at this point. There are still changes taking place within the many industries involved. 

Here is the state portal updated 12/28/23 for state adoption code.