By: Gil Rudawsky
Published: January 7, 2011
The government closes a door on one tax break in 2010 but opens a window on another. Windows and doors can earn you up to $500 in 2011.
For two years—from 2009 to 2010—you were able to take $1,500 in tax credits for a slew of energy-efficiency improvements, including better doors, windows, and skylights. If you took full advantage of them, congratulations:
- File IRS Form 5695 in 2011.
- You’re done—you’ve hit the feds’ lifetime max.
At the last minute, the government threw you a bone, adding a suite of less-generous but still useful energy tax credits, available only to those who didn’t take advantage of the 2009-2010 program:
- For doors, you can claim up to a $500 credit.
- For windows and skylights, you can claim only up to a $200 credit. (That’s total—not per window.)
- Installation costs aren’t covered.
Tax credit limits and deadlines:
- 10% of expenditures, up to $500 for the year, for all energy improvements combined.
- Install the relevant doors, windows, and skylights by Dec. 31, 2011.
- Save receipts and labels.
By mid-January the official Energy Star site will be posting new guidelines on what exactly is covered. It’s your safest bet for information on how to get the credit.
Don’t rely solely on contractors who may not know the details or who promise their products will get the credit in order to make a sale.
Should you be thinking about window replacement?
A good rule of thumb for window replacement:
- Don’t bother if they’re less than 15 years old, says Jim Rooney, a home inspector in Annapolis, Md. Savings on your energy bills will be negligible since window technology hasn’t changed that radically and the integrity of your windows should still be intact.
- Shoddy installation or poor manufacturing may call for exceptions to the 15-year rule. Windows that are 20, 30, or more years old are prime candidates for replacement.
Most of your focus should be on windows, since they’re more numerous. However:
- Skylights are notorious for energy loss, too, not to mention water leaks.
- Exterior doors tend to outlast windows, so keep them unless the upgrade is purely for aesthetic reasons. Besides, weather stripping and snug sweeps can boost the energy efficiency of exterior doors for a whole lot less money.
Adding up the costs and savings
With windows, doors, and skylights, you get what you pay for:
- Expect to shell out between $500 and $1,000 per window, including installation, or about $10,000 total for a moderately sized house of about 2,000 square feet.
- New energy-credit-qualified doors and skylights are also in the $500 to $1,000 range, including installation.
Products on the higher end of the cost scale are usually better constructed and more energy efficient, says Tom Herron of the National Fenestration Rating Council. NFRC is a non-profit organization that administers the rating and labeling system for the energy performance of windows, doors, and skylights. It could take years to recoup the upfront costs, but you should see an immediate reduction in your energy bills.
In general, you’ll save $126 to $465 per year replacing single-pane windows in a 2,000-square-foot house with tax-credit-eligible windows, according to the Efficient Windows Collaborative, a trade group.
In other words, you’ll save 15% to 40% off the typical energy bill.
Do your replacements qualify for tax credit?
A label alone doesn’t guarantee your new windows, doors, and skylights qualify for the energy tax credit, but it does provide critical information related to eligibility.
To qualify, windows, doors, and skylights must have:
- U-factor of 0.30 or less. Measures how well a product prevents heat from escaping.
- Solar Heat Gain Coefficient (SHGC) of 0.30 or less. Gauges how well a product blocks heat from the sun.
- Labels also carry information on light transmission, air leakage, and condensation resistance.
Energy Star may modify these requirements, so check online before making a purchase.
Herron, of the NFRC, says 80% to 85% of the manufacturers in North America provide NFRC labels. All Energy Star-qualified windows carry an NFRC label, according to Energy Star, a joint program of the U.S. Department of Energy and the U.S. Environmental Protection Agency that promotes energy-efficient products and practices.
Resist the urge to trim costs by purchasing cheaper windows, doors, and skylights with poor U-factor and SHGC ratings. Not only will you miss out on the tax credit, but energy bills won’t come down much.
This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.
Gil Rudawsky has been covering business and consumer issues as a reporter and an editor for 18 years, most recently as a deputy editor at the Rocky Mountain News. He lives in a house built in the 1930s, and always keeps the home’s character in mind when making upgrades.