If you occupy your home jointly with someone, especially if that person is not your spouse, you need to follow specific steps to allocate the tax credits for energy-efficient home improvements. Here’s how you can do it using Form 5695:
Allocating Tax Credits for Joint Occupants
- Complete Form 5695 Individually: Each joint occupant must complete their own Form 5695. This means each person will need to report their share of the expenses related to energy-efficient home improvements.
- Identify and Report Your Share of Expenses:
- On lines 18a, 19a, 19c, 20a, 22a, 23a, 24a, 25a, 26b, or 29d of Form 5695, each occupant should enter the amount they personally paid for the energy-efficient improvements.
- Determine the Allocable Credit:
- If the total credit that would be allowed for all occupants exceeds the credit limit for any item of property, you must allocate the credit. Your allocable share of the credit is determined by the fraction of what you paid out of the total cost paid by all occupants. The formula is:
- Credit Allocable to You = (Credit Limit for Property) × (Amount Paid by You / Total Amount Paid by All Occupants)
- Enter your allocable share of the credit on the corresponding lines (18b, 19b, 19d, 20b, 22b, 23b, 24b, 25b, 26c, and 29e) of Form 5695.
- Attach a Statement Explaining the Allocation:
- You should attach a statement explaining how you allocated the credit among joint occupants. Include details such as names of occupants, SSNs, property address, description of improvements, total cost, and the cost-sharing breakdown among occupants.
- File Your Returns Appropriately:
- If both joint occupants are claiming the credit, you may need to file your returns by mail due to electronic filing limitations with some tax software.
By following these steps, you can correctly allocate and claim your share of the energy-efficient home improvement tax credit when occupying a home jointly with someone other than your spouse.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-i-allocate-tax-credits-if-i-occupy-my-home-jointly-with-someone/
