What is the nonbusiness energy property credit?

The nonbusiness energy property credit is a special credit which you are entitled to claim for certain energy improvements made to your home in 2006 and/or 2007. The home must have been your primary residence, as discussed in IRS Publication 523.

This credit is not very large – the most you can claim for 2006 and 2007 combined, is a $500 credit. Specifically, you can claim: up to $200 for any improvements you make to exterior windows (including skylights); up to $50 for the installation of an advanced main air-circulating fan; up to $150 for the installation of a qualified furnace or hot water boiler; and up to $300 for the installation of any qualified equipment which helps the building’s overall energy efficiency (such as qualified central air conditioning, heat pumps and water heaters). In addition to these, the credit also applies to: the installation of any insulation material which is primarily designed to help reduce the heat loss or gain of your home; the installation of exterior doors; and the installation of a metal roof (but only if the roof has pigmented coating designed to reduce your home’s heat gain).

To claim this credit, you should use Form 5695.