Learn about New Windows or Replacement Windows and Doors for Today's Homes: energy tax deductions

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The Taxman is Coming. Don’t Forget Your Tax Credits

By Gates Dearen

With the holidays, Super Bowl and Valentine’s Day now behind us, one of the big blinking lights on everyone’s calendar is April 15th, income tax day. If you’ve not yet done so, it’s time to start

Tax Day Reminder (Photo credit: SalFalko)

gathering and organizing your W2s, 1099s, receipts, bank statements and other pertinent paperwork. There is good news if you just purchased a home, took out a construction or home improvement loan, or if you just upgraded your home by replacing your old windows and doors with new, energy efficiency models.

But before you sit down to file your taxes online, or work with your accountant, remember that by owning a home, you may qualify for some of the above mentioned tax breaks. In order to reap, you must sow, which means you’re going to have to go through the process of itemizing your taxes to take advantages of the deductions. Potentially time consuming? Yes. A hassle? Perhaps, but once you’ve done it, the benefits are usually worth the time and effort – especially if you replaced your windows, skylights or exterior doors last year. You may be able to help pay for those upgrades by taking advantage of certain tax breaks. You should always seek the advice and counsel of qualified tax accountant or attorney before claiming any deduction. Now that the disclaimer is out of the way, let’s look at ways you can save money.

Home Improvement Loan Interest

You may be able to deduct the interest on a loan you’ve taken out to make improvements on yo

ur home. Qualifying loans are those taken out to add “capital improvements” to your home, which means the

improvement must increase your home’s value, adapt it to new uses, or extend its life. Installing a new

carpet or painting the exterior isn’t considered capital improvements. However — and here’s the good news — installing new windows, skylights and doors are considered capital improvements.

Energy Efficiency (Photo credit: London Permaculture)

Residential Energy Efficiency Tax Credits

The American Taxpayer Relief Act of 2012 retroactively renews the Residential Energy Efficiency Tax Credit of 2011. Homeowners can claim a credit of up to 10% or $200 of the purchase price of qualifying windows and 10% up to $500 for qualifying exterior doors. Installation costs are excluded. Windows, doors, and skylights that are eligible for a federal tax credit and must meet these strict criteria:

Windows must be installed between January 1, 2012 and December 13, 2013.
Products must be installed in the homeowner’s primary residence.
Products must meet Energy Star published criteria for the Energy Star Climate Zone in which they are installed.

Furthermore, if you claimed an energy efficiency credit in a previous taxable year, please consult a tax professional or visit www.irs.gov to determine if you’re still eligible.

What Makes a Window, Skylight or Door Energy Star qualified?

These products are manufactured by an Energy Star partner, they’re independently tested and certified by the National Fenestration Rating Council (NFRC), and they meet stringent energy efficient guidelines as defined by the U.S. Department of Energy (DOE). The DOE doesn’t require any specific technologies, yet certain product features are common.

Homeowners can claim a Federal Tax Credit for upgrading their primary residence with energy efficient windows and exterior doors.

It’s important to keep in mind that, just like clothing, some windows and skylights are better at insulating you from the cold, whereas others are better at keeping you cool when outside temperatures are warm. Performance criteria for windows and skylights are based on four climate zones: Northern, North-Central, South-Central, Southern) and ratings that have been certified by the NFRC.

Education Tax Deductions (Photo credit: StockMonkeys.com)

In general, doors provide more insulation than windows or skylights, based upon the amount of glass your exterior doors have, called the “glazing level” and ratings certified by the NFRC.

In addition to claiming a tax credit, if you’ve replaced your windows, skylights or external doors, there are other steps you may take to save money on your taxes. Again, when in doubt, it’s always best to seek the advice of a qualified tax consultant or attorney.

· Construction Loan Interest - If you take out a construction loan to build a home, you may qualify to deduct the interest. The IRS only allows a deduction for mortgage interest if the loan relates to your principal residence or a second vacation home used for personal purposes.
· Home Office - If you use a portion of your home exclusively for the purpose of an office for your (small) business, you may be able to claim a deduction on your taxes for costs related to insurance, repairs and depreciation. If you upgraded your windows and an exterior door associated with your home office, these too may be considered deductions.
· Mortgage Insurance Premiums - You may be able to deduct the premiums paid for private mortgage insurance for your principal residence and for a non-rental second home.
· Mortgage Interest Paid at Settlement - If you’ve bought a new home within the past year, on a mortgage of up to $1 million, you can deduct the interest you pay at settlement if you itemize your deductions on Schedule A (Form 1040).
· Points - Did you pay points in order to obtain your home mortgage? These fees are included on the income tax deductions list and can be deducted as long as they are associated with the purchase of a home
· Property Taxes - If they’re based on the assessed value of the real property, you can deduct your state and local property taxes.
· Selling Costs - If you sold a home in the past year, you may be able to reduce your income tax by the amount of your selling costs, which can include title insurance, advertising expenses, broker’s fees, and repairs.

We all know tax codes can be confusing. You may want to consult the IRS’ website for information concerning deductions and credits. To be certain, you should meet with a qualified tax professional to ensure you’re not missing any deductions for which you’re eligible.

In this article, I covered many of the different types of tax breaks the IRS allows for homeowners and individuals and business upgrading their homes and home offices via construction, home improvement loans and energy tax credits. If you found this article useful, pass it on to your friends and neighbors. If you have a comment related to this article, please post it in the Comments section of this blog. It's been my pleasure informing you about these tax breaks. I look forward to our next visit.

Gates Dearen and Richard Walden: Local owners of HomeRite Windows and Doors in Jacksonville, Florida. We have been serving the building products industry in Florida for over 25 years. We know the products, the industry, the market and what adds great value to a home. Our approach is a little different. We strive to match the homeowner with the right windows for their home and budget. We understand that home improvements can be a hassle. We’re here to make life easier with first-rate, energy efficient products; affordable prices; and expert, award-winning installers that employ the best practices and respect your home as if it were their own.

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One Last Blast

By Gates Dearen

Ah yes, its March, the time of year when winter meets the spring. As we all know this is when Old Man Winter tries so desperately not to lose his icy grip to warmer weather. So traditionally speaking March is that month that gives us that one last blast of winter as we all welcome the warmth

Knocknarea Icy Window (Photo credit: Anna Leask)

of spring. Now for those of us down here in Florida, March has actually been colder than February, but that’s beside the point. Whether you live up north or south it doesn’t make a difference. It is also the time of year when we should ask ourselves about our energy cost and did my windows and doors benefit me this year? Or did they cost me? Today’s article is about just that. I’m going to provide you with a simple checklist of things you can do to find out if your windows and doors are in a winning arena or if they’re fighting a losing war and gradually costing you more year after year.

5 STEP CHECKLIST

1. Do a visual inspection of your windows and doors. I know this is the obvious but things can appear that were not there last year. Look for cracking around the perimeter of your windows and doors, spaces or gaps. Look for condensation between the panes of glass. You can use a flashlight to shine around the perimeter of your closed doors. With the aid of someone on the opposite side. If your aid can see light coming through, then air is coming through as well.

2. Hands on. Physically open each window to see that is in good operation. If you have trouble opening the window or if it sticks half way this is an indication of swelling and possible

Caulk Roads 1 of 4 (Photo credit: WireLizard)

water damage. Either way your window is under stress and you’re not getting the maximum benefit for your home.

3. By using a flame such as a lighter or candle look for flame flicker around the perimeter of your windows and sashes. This is an indication that drafts are infiltrating through your windows. If there is a clear indication of the flame flickering or get blown out there is no question that you are paying a higher energy bill than you have to. This is certainly a time to really consider replacing your windows.

4. Weather Stripping. Examine the weather stripping on your windows and doors. Replacing the weather stripping can certainly reduce drafts and may be all that you need. This is certainly a preventative maintenance procedure. What it really comes down to is the age and quality of the window or door.

5. Your Cost. Compare your energy bill from last year .If you received an increase from the electric or gas company you will need to subtract that percentage from the equation. If you still notice that your energy cost are higher than last year then that’s a clear indication that you're losing more money each year.

TAX-BREAK

taxes (Photo credit: 401(K) 2013)

Almost every homeowner receives a tax break or deductible when installing an energy efficient product into or onto their home. I advise that when considering a purchase look for
the yellow energy star. This indicates that the federal government has determined that this meets high energy standard and regulations .This typically means that you will be entitled to the energy saving deduction. As always check with your window expert or your accountant.

SUMMARY

Before I sum this up, I wanted to share with you a quick story. My friend Mike has a home that has a living room with four Lazy Boy recliners. Nobody wanted to sit on the recliner nearest to the window because it had such a draft. One day I finally talked Mike into replacing that window. Now it’s the best seat in that room and that room is the most comfortable one in the house. His energy bill has decreased and he is happy in many ways.

It’s not just about saving money, we work hard to help our clients achieve their home ownership goals. Your home shouldn’t be uncomfortable, it should provide you with the full use and enjoyment of that living space. Thank you for reading this article. I certainly hope you found it interesting and helpful. If you have any comments post them in that section and share this article with your friends. If you have other ideas we'd like to hear from you. Until next time, enjoy your home.

Gates Dearen is the co-owner of HomeRite Windows and Door in Jacksonville Florida. Owners Gates Dearen and Richard Walden have been serving the building products industry in Florida for over 25 years. They know the products, the industry, the market and what adds great value to a home. Their approach is a little different. They're simply looking to match the home owner with the right windows for their home and budget. Home improvements are enough of a hassle – they’re here to make life easier with first-rate, energy efficient products, affordable prices, installers that know best practices and who have respect of your home.

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