Q: Is this a tax credit or tax deduction?

A: While the IRS is not expected to release the updated forms and instructions for filing for this residential energy efficiency tax credit for several months, the IRS has clarified that this is a non-refundable tax credit. That means that the credit cannot reduce a taxpayer's annual tax liability below zero. This is separate from the refunds received after filing, which has to do with deductions, exemptions, and the level of paycheck withholdings. Essentially, this non-refundable tax credit is available to any taxpayer whose annual tax liability exceeds $1,500. Here's more on how homeowners should file for this credit.