As I was looking out my outdated windows, amazed at the amount of rainfall we have gotten here in Des Moines the past few days, I remembered that one of my goals this fall was to replace a few of those outdated windows we have in our home in Beaverdale. And, low and behold, the IRS has given us a chance to recoup some of the cost of those replacement windows via a tax credit. For certain energy efficient property placed in service before 2008 (that is, before 1/1/2008), a taxpayer can claim a lifetime nonrefundable credit of up to $500 for making qualified energy saving improvements to their principal residence.
However, in replacing those windows, only $200 of this credit may be used just for the windows. The other portion of the $500 can be used for various energy improvements. Those costs such as the exterior windows, insulation materials or systems that reduce heat loss/gain, exterior doors, and certain metal roofs with special energy efficient coatings are totalled and 10 percent of those costs count towards the credit. For example, if I purchase $1200 of windows I would have a credit of $120. If I purchased $3000 of windows, I would max my window portion of the credit at $200. If I also purchased $1000 of insulation materials, I would tack on an additional $100 to my credit.
Residential energy property expenses which meet specific standards are also eligible. These include:
- $300 for the cost of energy efficient building property (meeting certain standards) such as an electric heat pump water heater, electric heat pump, geothermal heat pump, central air conditioner, and natural gas, propane or oil water heater
- $150 for natural gas, propane or oil furnace or hot water boiler
- $50 for an advanced main air circulating fan.
Remember, that the lifetime maximum credit is $500 and it expires by the end of 2007!
Just to let you know my personal situation, I did replace my water heater last year ($300 credit) and purchased some insulation ($200 total - 10% credit would be $20) for a total credit of $320 on my 2006 tax return. So my maximum credit I can take against the windows (and to max out my lifetime credit) is going to be $180, or $1800 of windows! I think I can get there!
Comments