Are Replacement Windows Tax-Deductible?
Making a handful of necessary improvements to your home can require some serious out of pocket costs. Many homeowners are tempted to make improvements to their home, particularly older homes, because it brings the promise of increased energy efficiency. With better windows and doors, you may be able to lower your electric or gas bill due to reduced heating and cooling costs.
The long-term gain associated with these energy-efficient improvements can be significant, but that doesn’t offset the immediate cost they require. Some homeowners are wondering whether there might be a financial advantage to replacing the windows on their home when it comes to filing their taxes. The question is, are replacement windows tax-deductible?
To help you figure out whether your new upgrades are tax-deductible, let’s take a closer look at why the government may issue these credits.
Tax Credits for Energy Efficiency
Conserving energy costs is a growing trend across the nation and around the world. Whenever possible, people are seeking out alternative sources of energy such as solar power.
You may even be well acquainted with the large black solar panels that are quickly springing up on the rooftops of houses everywhere. Since the trend became so popular and is important for preserving the world we live in, the federal government began to issue tax credits for energy efficient upgrades made to existing structures.
The Internal Revenue Service (IRS) is responsible for managing these claims, and there are some pretty strict guidelines about what qualifies. Under the umbrella of the 2009 International Energy Conservation Code, there were certain requirements listed that outlined improvements that constituted “energy efficiency.”
The tax credits were available for homeowners to take advantage of for their primary residence only. They could be used to improve the insulation of your building or to upgrade to a more efficient heating, cooling, or water-heating system.
The maximum credit that homeowners could apply for between 2011 and 2016 was $500. Once you claimed the maximum amount in any of those years, you could not use it again for the following five years.
What Insulation Improvements Were Included?
Let’s take a closer look at which improvements were specifically included in these tax breaks when it comes to insulation. Homeowners could claim their tax credits for any of the following items:
- Insulation materials or systems
- Exterior doors, windows, or skylights
- Pigmented metal roofs
- Asphalt roofs with appropriate cooling granules
The insulation items had a general tax credit that could be used. Homeowners were asked to take a tax credit of ten percent of the total cost including labor for a maximum of $500. Keep in mind that there may have been certain caps and maximum tax credits placed on individual items within the insulation category though.
Windows had a tax credit worth 10% of the cost with a maximum credit amount of just $200. All of the new windows were required to meet the 6.0 Energy Star requirements to demonstrate their overall energy efficiency.
To be more specific, the credit could be used for any home that was replacing a double-hung, casement, or egress window on a preexisting residence. New homes that opted for qualifying windows could also claim the credit.
The best part of the program was that the windows didn’t have to be installed throughout the entire house. A partial installation was still eligible for the tax credit, allowing homeowners to choose which areas of their home could benefit from upgrades the most.
It could even be claimed to cut a hole in the home and create a new window that didn’t exist previously. Remodeling became significantly less expensive with access to the tax credit that encouraged energy-efficient features.
What About Appliances?
When it came to appliances, you could use the tax credits to purchase a main air circulating fan, certain types of hot water boilers or furnaces, heat pumps, central air conditioning units, water heaters, or biomass stoves.
Each item had a maximum amount that could be used as a tax credit during these years. For example, an advanced main air circulating fan was eligible for just a $50 tax credit. An electric heat pump water heater with a high energy factor was worth a substantial $300. Homeowners had to be very cautious when it came to filing their taxes, ensuring that they only claimed the specific upgrades that they made.
Are Replacement Windows Still Tax-Deductible?
Unfortunately, any replacement windows that you purchase now will no longer qualify for the tax credit from the IRS. The last year that qualified for these improvements was 2016 and they had to have been installed prior to January 1, 2017.
The only tax credits that are still available for energy-efficiency apply to solar energy installation. These will be available through 2019, but they’ll be slowly reduced each year thereafter until the end of 2021. This is still a substantial savings for homeowners who are dedicated to making home improvements though.
The renewable energy tax credit allows you to claim up to thirty percent of the cost of the installation and materials for installing solar, wind, and geothermal equipment. There are no limits to this tax credit, allowing you to increase your savings on the installation of one of these systems in the present and into the future. Systems that qualify for this tax credit include:
- Solar panels for home electricity use
- Solar-powered water heaters for the home
- Wind turbines that generate 100 kilowatts of energy
- Geothermal heat pumps
- Fuel cells that utilize a renewable resource and generate at least 0.5 kilowatts of power
Homeowners clearly have a lot of incentive and options to maximize the energy efficiency of their current home. While it’s a shame to see that some of the smaller tax credits, such as those for replacement windows, are no longer offered, the remaining credit is well worth some time and attention.
If you’ve been on the fence about installing any higher energy-efficient features in your home, this is the ideal time to start following through. Don’t let another moment pass you by or you may miss some of the beneficial features of the tax credit available from the federal government.
With replacement windows no longer being tax deductible, it has never been so important to find the most affordable, energy efficient windows. That’s just what you’ll get at Feldco. Our high quality, vinyl windows are made to keep the outside temperatures out of your home and keep you comfortable year round.
Get a free quote now and get started on your replacement window project today.