Claiming Your Energy Tax Credit for Windows and Doors in 2011
The tax man cometh on April 15, 2012! Time to start preparing your income taxes, and time to claim this federal tax credit, if you purchased and installed certain energy-efficient products for your home in 2011 that is. If you have never applied for this tax credit, or if you didn’t apply for it in 2010, then you need to be aware of a change to the program that affects what you can claim for 2011.
The 2011 Tax Credit Program
Back in 2009, as part of the government's stimulus package, certain energy-efficient retrofits, such as replacement windows and doors, purchased and installed between January 1, 2009 and December 31, 2010 were eligible for a tax credit equal to 30% of the product cost. This “new” tax credit raised the maximum claim to $1,500, which was very attractive for energy-wise homeowners who were planning to renovate that year.
Fast forward to the end of 2010, and while Congress voted to extend the tax credit for installing energy-efficient retrofits for yet another year, unfortunately, the amount of the credit a homeowner could claim was significantly scaled back. Instead of a 30% deduction, up to $1500, homeowners can now only claim a 10% deduction, which is capped at $500. And there’s even an exception to that.
Although Energy Star qualified doors are eligible for the maximum of $500, Energy Star qualified windows and skylights have been capped at a maximum deduction of $200. Moreover, these caps represent the new “lifetime limits” and are retroactive to 2005. That means, if you've claimed a deduction already, you may have used up your share. You will have to check your previous returns and/or speak with your tax advisor.
All of the other guidelines and restrictions remain the same. The tax credit does not include installation costs, and only products purchased for an existing home that was your principal residence are eligible. New construction and rental properties are excluded.
Apart from windows, skylights and doors, other eligible retrofits include biomass stoves, heating, ventilation, air conditioning (HVAC), insulation, roofs (asphalt and metal), as well as non-solar water heaters—all still eligible under the federal tax credit program for 2011.
Not all ENERGY STAR Qualified Products Qualify for a Tax Credit
However, don’t make the mistake of assuming that all ENERGY STAR products qualify for a tax credit, either. Take note that those new windows and doors you purchased must have a U-Factor of .30 or less and a Solar Heat Gain Coefficient (SHGC) of .30 or less.
By the way, this "30/30" standard also came into effect in 2009.
And just to refresh your memory, the U-Factor rates how well the window keeps the heat in while the SHGC (Solar Heat Gain Coefficient) rates how well it keeps the solar heat out. These factors are rated and certified by an organization called the National Fenestration Council (NFRC), and they can be found on the NFRC label, which you would have been instructed to save at the time you purchased your window, door or skylight.
Finally, while all products have to be ENERGY STAR qualified, you did not have to replace all the windows/doors/skylights in your home in order to qualify for the tax credit. Nor does the tax credit just apply to replacements—adding a new window to your home where there wasn't one previously also qualifies.
How to File for Your Federal Tax Credit
The method of filing your consumer tax credit for energy efficiency hasn’t really changed, but to recap, you’ll need four documents when submitting your claim:
1. A copy of your Contract
2. Your Receipt
3. The Manufacturers Certification Form
4. A copy of the NFRC Label
The Manufacturer’s Certification Form certifies that the product purchased qualifies for the federal program. You would have received this at the time of purchase, but if you cannot find it, you can obtain it from the manufacturer’s website. As for that NFRC label, now you see why you would have been instructed to hold on to it! You’ll need both of these documents if the IRS requests proof.
So, for products "placed in service" in 2011, you need to file the 2011 version of the IRS’s Form 5695 (the residential energy tax credit). Submit Form 5695 with your 2011 taxes, but keep your receipts, the Manufacturer's Certification Statement and NFRC label for your records.
Is the Tax Credit Worth the Trouble?
Although the savings to the consumer aren’t quite as robust as in previous years, it’s still worth your while. As the Department of Energy points out, a tax credit is generally more valuable than an equivalent tax deduction: that’s because a tax credit reduces your taxes dollar for dollar, while a deduction only removes a percentage of the tax you owe.
At tax time, it’s good to know what savings are available to us, and if Uncle Sam is still offering taxpayers the opportunity to save a little bit on energy-efficient renovations, then we should be taking advantage of the offer. As they say, even a little bit goes a long way.
Gerry Rogers is the founder and president of Mr. Rogers Windows. He has been selling and installing home improvement products for over 25 years. After introducing his Lifetime Performance Guarantee, Gerry has earned the trust of thousands of clients by "doing the right thing" to ensure complete satisfaction when it comes to quality products and installation.