We are considering installing two new windows in our home. The cost of the windows is over $1,000 and the cost of the installation is about $400. Will we be eligible for a tax credit?
Assuming the windows meet the energy efficiency requirements of the law, you should be eligible for a tax credit. The American Recovery and Reinvestment Act of 2009 provided energy conservation incentives. The incentives are primarily distributed in the form of tax credits. The tax credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. However, there are other eligibility requirements to consider:
• The windows must be installed on your principal residence. New construction and rental properties do not qualify.
• For property placed in service after February 17, 2009, in addition to meeting the prescriptive criteria for such component established by the IECC, the property must have a U-factor of 0.30 or less and a solar heat gain coefficient (SHGC) of 0.30 or less.
• The credit only applies to the cost of the window. Cost for preparation and installation do not qualify when calculating the credit.
• The energy efficiency tax credit is technically "non-refundable" which means at the end of the year, you can't get back more in credits than you paid to the government in taxes throughout the year. If you are unable to claim the entire 30% of your purchase for the above products in one year, you can carry forward the unclaimed portion to future years.
• There are no income limitations to be eligible for the tax credit.
In your situation, it appears that you will be eligible for a tax credit of approximately $300. This is 30 percent of the price of the window with no credit being generated by the cost of the installation. To obtain the tax credit, you will need to complete form 5695 and attach it to your 2010 individual income tax return.
In addition to energy-efficient windows, the cost of energy-efficient skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit.
For more information, see also the Energy Star web page.
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