Energy Credit Deductions

[rjcoulombe]

I sold my primary home 3 years ago and now my 2nd home is my primary home. It was built in 1998. I have never claimed energy credits on my 2nd home. Now, I have had to replace several window glass panes over the last several years because of seal failures with the argon gas. I also had to replace 2 french door glass panes last year. These glass replacements are all Energy Star rated. Can I take a energy tax credit since my 2nd home has been my permanent and only home?

[Opus 17]

Up through 2022, the credit has a $500 lifetime cap per taxpayer, regardless of how many residences you make improvements to.  For improvements installed starting in 2023, the law changes, and there is a $1200 annual limit, with a $600 annual sub-limit for doors and windows. 

[rjcoulombe]

 My question was related to upgrading windows that originally installed, in 1998 were double pane with argon gas but had leaks over time in the seals and have been changed to energy star panes with an improved energy savings. Are these still deductible? Or is this considered a repair?

[rjcoulombe]

 My question was related to upgrading windows that originally installed, in 1998 were double pane with argon gas but had leaks over time in the seals and have been changed to energy star panes with an improved energy savings. Are these still deductible? Or is this considered a repair?

[Opus 17]

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@rjcoulombe wrote:

 My question was related to upgrading windows that originally installed, in 1998 were double pane with argon gas but had leaks over time in the seals and have been changed to energy star panes with an improved energy savings. Are these still deductible? Or is this considered a repair?

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Here, the definition of "improvement" is not quite the same one that is generally applied to repairs vs improvements.  For this section of the code, a qualifying improvement must have an expected lifetime of at least 5 years.  Then, you could potentially treat windowpanes as "windows" or as "other building envelope component" as it is designed to reduce air infiltration and heat loss.  

So I think it's probably allowed.  However, there is still the overall $200 limit on building components (including windows and doors) that has been in place since 2006, so you might not qualify if you have claimed the credit before.  The change from a lifetime cap to a higher annual cap was only effective going forward from 1/1/23. 

The law has the following definitions.

(1) In general The term “qualified energy efficiency improvements” means any energy efficient building envelope component, if— 

(A) such component is installed in or on a dwelling unit located in the United States and owned and used by the taxpayer as the taxpayer’s principal residence (within the meaning of section 121), 

(B) the original use of such component commences with the taxpayer, and 

(C) such component reasonably can be expected to remain in use for at least 5 years.

(2) Energy efficient building envelope componentThe term “energy efficient building envelope component” means a building envelope component which meets—

(A) in the case of an exterior window or skylight, Energy Star most efficient certification requirements,

(B) in the case of an exterior door, applicable Energy Star requirements, and 

(C) in the case of any other component, the prescriptive criteria for such component established by the most recent International Energy Conservation Code standard in effect as of the beginning of the calendar year which is 2 years prior to the calendar year in which such component is placed in service.

(3) Building envelope component The term “building envelope component” means—

(A) any insulation material or system, including air sealing material or system, which is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on such dwelling unit,

(B) exterior windows (including skylights), and

(C) exterior doors.