Window Tax Credits Update

Window Tax Credits

In the US, a tax credit applies to the sum deducted from the amount of tax an individual or business is obliged to pay to the state. This credit may be given in the form of subsidy or to encourage people to invest or perform a certain constructive behavior for the condition of the state. There are many forms of tax credits, and each recognizes a specific type of action performed in support of the regulations made by the state.

Federal tax credits may take the form or may support non-refundable investment, historic rehabilitation, renewable energy use, renewable energy production, low income housing, work opportunity, or qualified school construction. Some counties, cities, or states may also offer tax credits for their jurisdictions that are similar to the ones offered on the federal level.

President Barack Obama enacted the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010, signed on December 17. This law certifies homeowners for a 30% tax credit by making energy-efficient choices and purchasing Energy Star-certified products for their homes. There is a long list of products eligible for the tax credit, and some of which are windows, doors, skylights, and home appliances. In 2006 and 2007, the same law was already present, and it stated the same requirement for appliances and improvements with at least 30% energy efficiency. The same law was carried through 2009 and 2010.

Although the energy or window tax credit enacted by the Obama administration sounds good, it is certainly not absolute. Homeowners should take some considerations because not all energy-saving appliances and improvements they buy or make may be qualified for the tax credit. As stated by the law, only products and home improvements meeting Energy Star requirements are eligible, and these items must be installed in the taxpayer’s own residence, not in new construction homes and rental homes. Also, the products and improvements must be placed in service by December 31, 2010, which means that the new energy-efficient additions must be operable by that date.

If the homeowner resides in a condominium, a mobile home, or a cooperative apartment, he or she is still eligible for the window tax credit as long as the home follows the guidelines of the Federal Manufactured Home Construction and Safety Standards. The homeowner should also ensure that the products have the Energy Star label, even though it may look a little different depending on the product. It should also be noted that the amount of credit is by product or type: $200 is maximum for windows; $500 is maximum for doors; and improvements like fuel cells, solar panels, geothermal heat pumps, and solar-powered water heaters have no maximum credit amount.

This window tax credit can certainly impact the price of an overall home improvement job. For instance, if the homeowner purchased a new energy-efficient window for $500 in 2014, he can claim a credit of $150 on his federal tax income return for that year. This means that he is still qualified to claim a remaining $50 for another appliance. However, if he installed two windows, he could only claim the maximum $200 window tax credit and not $300, which is the 30% of $1000.

To apply for the window tax credit, homeowners should fill out the necessary forms available from the Internal Revenue Service website. Take note that there is a specific form for renewable and efficiency credits, plug-in motor and electric vehicle credits, and alternative motor vehicle credits. Also, they should save or produce a copy of all documents including receipts and certifications. They should discuss matters with an expert if they have certain questions and concerns in claiming their tax credits.