Q: I purchased replacement windows last year and I’m thinking about installing solar panels this year. Do you know what tax credits are available to me?
A: Like it or not, tax season is here. Whether you owe Uncle Sam or you managed to get a refund, one thing remains certain: you can’t skip over tax season. However, what else remains certain is that many New England homeowners can potentially enjoy energy tax credits from exterior upgrades that they made in the last year.
Before you run out to file your taxes or prepare to get the job done at home, here are the energy tax credits to keep in mind—and hopefully it will result in less money owed to the IRS or even a return headed your way:
Two Types of Energy Tax Credits for New England Homeowners:
Before we dive into the exact upgrades that qualify for energy tax credits this year, we want to give a quick overview of the two types of credits available from the IRS.
The most popular is the residential energy tax credit. According to the IRS, it applies to the nonbusiness energy property credit and the residential energy efficient property credit. These are for purchases of windows, doors, roofs, water heaters, furnaces, insulation, etc. made between 2011 and 2016. They officially expired on December 31, 2016.
It’s important to note that homeowners are capped out at $500 total on this energy tax credit. If you already tapped into your $500 in 2015 and made another qualifying upgrade in 2016, you will not be able to use this credit again. The cost of installation and labor is also not included—so, the product itself must cost $500 or more in order to qualify.
The other energy tax credit applies to the 30% overall credit for an energy efficient upgrade. This tax credit applies to higher cost renewable energy appliances such as geothermal heat pumps and solar energy systems. This credit also expired in 2016, but it has been extended for solar upgrades only. This credit was extended through December 31, 2019. Fortunately, for those who decide to move forward with solar panels, you can also receive a credit for the roof replacement needed underneath your new solar panels. Ask your accountant for details.
Unlike the residential energy tax credit, there is no upper limit on the 30% energy credit.
What Qualifies as an Energy Tax Credit?
Now that you know the difference between the two types of tax credits, it’s time to see if your most recent purchases qualify.
Residential Energy Tax Credits
If you’ve recently upgraded the exterior of your home, there is a good chance that you may qualify for the $500 tax credit this year. The products and appliances that qualify for this credit are the following:
Energy Efficient Replacement Windows
New England homeowners who choose to upgrade their home with energy efficient windows might be headed for a tax break this year. The catch is that the new windows can’t be bottom-of-the-barrel products that won’t help increase the efficiency of your home.
In order for your windows to qualify for the residential tax credit, they must meet version 6.0 with Energy Star requirements.
Energy Star 6.0 was finalized in January 2014. It includes replacement windows that meet specific performance requirements in terms of U-factor, Solar Heat Gain Coefficient, and air leakage.
For example, a qualifying window for the energy saving tax credit must come in at 0.3 CFM or less. This ensures that the window creates an airtight seal and eliminates as much air leakage as possible. A great product that goes beyond the requirements for the energy saving credit is the Elements Window by Soft-Lite.
Element’s airtight seal is one of the best in the industry. It only allows .01 CFM of airflow, while windows such as Andersen and Pella allow between .12 and .30 CFM.
Aside from dramatically reduced air infiltration, homeowners can also enjoy better performance in terms of blocking harmful UV rays.
Energy Efficient Entry Doors
While windows can help you earn a tax credit this year, let’s not discount entry doors. Entry doors follow the same guidelines on the Energy Star 6.0 rating requirements. Subcategories also include patio doors, sliding doors, and swinging doors.
In order for a door to qualify for the residential energy tax credit, it must meet specific criteria in terms of glazing. The door must also meet the same requirements for air leakage as windows, coming in at 0.3 CFM of airflow or less.
In addition to an Energy Star rating, keep in mind that the most energy efficient entry doors are engineered with a polyurethane foam core. Furthermore, glazing such as ComfortTech Warm Edge Glazing System is beneficial for energy savings. This system can dramatically improve your new entry door’s thermal performance.
Approved asphalt roofing may also earn you tax credits this season. Energy.gov specifies that the roofing must have specific cooling granulates in the shingles. These help keep your roof cool—and similarly to doors and windows, they must be rated by Energy Star to qualify for this tax credit.
What About the 30% Tax Credit?
The 30% tax credit applies to product types such as geothermal units. Also included under this category are solar water heaters and small wind turbines. These units must also be certified by Energy Star and for residential use only.
In addition to the tax credit this year, don’t forget that many of these upgrades yield an impressive return on investment. Remodeling Magazine’s 2017 Cost vs. Value report shows that exterior remodeling continues to pay homeowners back year after year.
We hope that we helped clarify the tax credits that are available to you. Contact Stephanie at email@example.com