How do tax credits apply to replacement windows cost?

July 08, 2011

Unless you are a tax expert, the simple mention of tax credits can make your head spin. Understanding which home improvements qualify for the tax credit can be confusing, to say the least. This guide intends to give you the basics on what to expect from replacement windows cost, as well as other home improvement points that can save plenty of money on your bottom line.

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How tax credits can affect replacement windows' cost

Let's start with replacement windows: Under the Tax Relief, Unemployment Insurance Re-authorization, and Job Creation Act of 2010, homeowners who install Energy Star-qualified windows in their primary residence before December 31, 2011 are eligible for a tax credit equal to ten percent of the product cost, up to $200.

For those who might have missed the tax credit in previous years, there is still time to take advantage of the savings. For energy-efficient products purchased between January 1, 2009 and December 31, 2010, homeowners might be entitled to a tax credit of 30 percent of the product price, up to $1,500 for the combined 2009 and 2010 tax years. Keep in mind that this credit includes all home improvements combined, including water heaters, roofing materials, insulation and more.

The cost of installation is not included in determining the amount of tax credit given. To ensure you have the proper documentation, ask your contractor for an itemized list of products installed. Save all receipts and Energy Star labels, just in case.

Going beyond windows: other tax credit options available

The government doesn't stop at windows when it comes to tax incentive. The Residential Energy Efficient Property Credit is for homeowners who are "going green" with new purchases for their homes, including solar water heaters, geothermal heat pumps, wind turbines, fuel cell property and solar electric systems. This credit offers 30 percent of the product price as a tax credit, usually allows you to include labor costs, and comes with no cap on the credit available.

Some products, however, are not eligible for this credit. Relying on the Energy Star designation doesn't necessarily mean a product will be covered by the Residential Energy Efficient Property Credit; therefore, it is up to homeowners to check the manufacturer's tax credit certification statement before making the purchase.

Under the Nonbusiness Energy Property Credit, homeowners can obtain the 30 percent tax credit, including labor, up to $1,500 for items such as high-efficiency heating and air conditioning systems, stoves that burn biomass, and the like. Items that exclude labor include windows, skylights, doors, insulation, and certain roofing materials.


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