Exterior Window Tax Credit

[Astroprop121]

Hi there,

We moved into a new home in 2023 and spent ~$4000 repairing several Andersen window sashes. I have the receipts which do not separate materials and labor. Can I enter this all in Turbotax in the Exterior Windows tab?

Or is a "window repair" not a new window. The sash is the majority of a window so I believe this is a gray area. Also, not sure what to do since the repair invoice just combines all cost. Thank you for your help.

[Opus 17]

It’s not a grey area. The law specifies “installation.“

(c)Qualified energy efficiency improvements

For purposes of this section—

(1)In generalThe 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.

[Astroprop121]

Thanks for your swift reply.

If I'm understanding you correctly, you're stating that my situation would be eligible for the credit? Thanks again. 

Also - the software states

Enter the cost of exterior windows which meet or exceed the version 6.0 Energy Star program requirements.

The credit is 30% of the total costs up to a maximum of $600.

Do not include the costs for labor, assembly, preparation, or installation.

[Opus 17]

@Astroprop121 

No, exactly the opposite.  Repairs are not eligible.

First, the law specifies "installation".  You didn't install windows, you repaired them.

Second, the word "improvement" has a specific meaning in the tax code that is distinction from repairs.  Because "improvement" is not specifically defined in section 25C as meaning something different than its general meaning, then the word has its general meaning in this context.  The IRS discusses repairs and improvements in publication 530.

Improvements.

An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. You must add the cost of any improvements to the basis of your home. You can't deduct these costs.

Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway.

Repairs versus improvements.

A repair keeps your home in an ordinary, efficient operating condition. It doesn't add to the value of your home or prolong its life. Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. You can't deduct repair costs and generally can't add them to the basis of your home.

Even if the damage was so extensive that the "repairs" (as you called them) materially added to the value of your home (would it appraise higher now?) or prolonged the home's useful life, it is still not "installation" of new windows.

Then also, the work has to meet the efficiency standard, which is "the most efficient Energy Star certification" in effect at the time.  The window is a system that all works together, the frame, weather stripping, sash, the insulated glass panels in the sash.  Even if the window system meets the most efficient Energy Star certification for 2023, is there a separate certification for the sash by itself?  When was the window system installed, did it meet the most efficient Energy Star certification for 2023 (6.0) or does it meet an earlier standard?  

In short, I don't believe replacing window sashes, even if they are efficient, constitutes installation of an improvement, as is generally and specifically defined in the tax code, and is not eligible for a credit.  However, you should always consult your own expert if you have questions.