There’s no doubt that putting new doors and windows in your home can boost its curb appeal and resale value. However, did you know it could also boost the overall energy efficiency of your home? With proper products, you can lower your heating and cooling bills throughout the year.
Even better, you can likely claim a tax credit when you purchase these home improvement products. This credit directly reduces the amount of tax you owe, helping lower your final bill at the end of the year. If your total tax owed is reduced below what you’ve already paid through withholding, you may even qualify for a refund. These tax benefits can help you recoup some of the up-front costs associated with your home improvement project.
Are Home Improvements Tax-Deductible?
The IRS offers a tax break to homeowners who purchase qualifying energy-efficient improvements for their households. Homeowners can qualify for a credit up to a maximum amount of $3,200 per year, which gets reported on their federal tax return.
To be eligible for these tax breaks for home improvement, the installation must be done after January 1, 2023, and before December 31, 2032. Homeowners can claim up to 30% of the total cost of their new ENERGY STAR energy-efficient home products up to the total maximum credit amount.
How Much of a Tax Deduction Can I Qualify for When Buying New Windows and Doors?
It’s important to note that you can qualify for a tax credit every single year up through the program deadline of 2032. Each category of energy-efficient improvement will have an individual maximum credit amount you can claim.
For example, you can claim up to $250 per exterior door, up to a maximum credit total of $500 for doors. New windows allow for a total tax credit of up to $600. For example, if you spend $1,000 putting a few new windows in your home, you can claim a credit equal to 30% of that.
In this case, that means you can claim a credit of $300 on your federal tax return. It’s also important to note that getting a simple home energy audit can help you learn about energy-efficient upgrades and qualify for a tax credit of up to $150 per year.
Who Qualifies for Home Improvement Tax Deductions?
One factor to keep in mind about this program is that only homeowners may qualify. You must be doing the energy-efficient upgrades on your primary residence. You may not qualify for this credit if you’re doing the upgrades on an investment property, a new home build, or on any home that’s located outside of the United States.
With many people working from home, it’s common to wonder whether these upgrades qualify if part of your home is used as an office. According to IRS guidelines, if 20% or less of your home is used for business purposes, you can typically claim the full tax credit for energy-efficient improvements.
For your new products to be eligible for this federal tax credit, they must be installed by a professional company. It’s best to keep your installation invoices on hand in the event of an IRS tax audit in the future.
How Do I Claim the Energy-Efficient Home Improvement Credit?
To claim this tax credit, you’ll need to file Form 5695, known formally as the IRS Residential Energy Credits Part II. It’s crucial to note that you must file this form during the year the product is actually installed.
You can’t file this credit in the year you simply purchase the upgrades without installing them. Filling out this form is fairly straightforward. You’ll fill in the total cost for each energy-efficient upgrade and calculate 30% of that total amount. Once you add all the eligible tax credit amounts together, you’ll transfer that total over to your IRS 1040 form to complete the rest of your taxes.
It’s highly advisable to consult a tax professional to ensure all your products are tax credit eligible and you list the appropriate amounts. These home tax credits are nonrefundable and can’t be carried forward into the following tax years. For this reason, you may consider doing an energy-efficient home improvement every year instead of all at once.
Upgrade Your Windows and Doors With Woodbridge Home Solutions
Woodbridge Home Solutions is your expert for energy-efficient window and door installation. We offer top-tier products that will do wonders for reducing your energy bills and even make you eligible to receive the federal Energy Efficient Home Improvement Tax Credit. Simply give Woodbridge Home Solutions a call today to schedule your next consultation. We serve Texas, Kansas, and Oklahoma.