Client installed a coleman gas furnace in 2025. According to the description it qualify for 30% of the cost up to $2000 credit. I entered the cost of 5600 on line 24a. & 25d. It only allowed 1200 credit, not 5600x30%= 1680. Where else do I need to enter in order to get $1680 credit?
Form 5695 credits (Energy Efficient Home Improvement) are likely lower than expected due to strict annual limits—generally $1,200 ($2,000 for heat pumps)—or because the credit is nonrefundable, meaning it cannot exceed your total tax liability. Excess credit for energy improvements cannot be carried forward, unlike solar credits
Reasons Your Form 5695 Credit is Lower:
Annual Limits: For 2023–2025, the total credit is generally limited to $1,200 annually (30% of costs).
Itemized Limits: Specific caps apply, such as $600 for windows, $250 for one door, $500 for all doors, and $150 for energy audits.
Nonrefundable Constraint: The credit can reduce your tax owed to zero, but it cannot result in a refund for any amount exceeding your tax liability.
Subsidized Financing: Costs paid for with government subsidies (e.g., state or local energy programs) cannot be claimed.
No Carryforward for Home Improvement: Unused amounts for energy efficiency improvements cannot be carried over to future tax years.
Maximum Annual Credit: You cannot exceed the yearly limits, even if you spent more.
The Line 24 entries are limited to the $600 credit each. You can see this on the form itself at 24d.
For items qualified for the $2,000 credit, use line 29. This assumes the furnace also has a heat pump component. Otherwise, the credit is properly limited.
