Federal Tax Credits for Window and Door Replacements

Energy efficient windows use improved frame materials, multiple panes, gas-filled spacers, and special coatings. (Enlarge)

For co-op and condo boards waiting for the right time to make their buildings more energy efficient, that time has come. As part of the economic stimulus package (a.k.a. The American Recovery and Reinvestment Act of 2009, which President Obama signed into law in February), residential property owners are now eligible to receive a 30% federal tax credit up to $1,500 per apartment owner for 2009 and 2010 on energy-saving improvements to their properties.

Qualifying Standards for Windows and Doors

Among the improvements eligible for the credit are replacing windows, doors, and skylights with more energy-efficient units. To qualify for the tax credit, the replacement units have to meet the following standards:

If installed from January 1 to May 31, 2009:
The units' must meet Energy Star standards (www.energystar.gov), which are less stringent than the requirements for units installed after June 1, 2009. Energy Star-rated windows typically include such features as multiple panes with gas-filled spacing, special coatings to reflect infrared light, and warm edge spacers to reduce heat flow and condensation. (Although replacement units installed before June 1, 2009 must meet Energy Star requirements, not all Energy Star-labeled windows and skylights qualify for the tax credit.)

If installed June 1, 2009 or later:
The units' U-factor and Solar Heat Gain Coefficient both must be less than 0.30. The U-factor measures the rate of heat transfer and how well a window or door insulates. The lower the U-factor, the better the insulation. The SHGC measures the amount of solar energy admitted and how well the window or door blocks heat caused by sunlight. The lower the SHGC, the less solar heat transmitted.

Note: Not all window replacements that qualify under Energy Star are appropriate for high-rise buildings. For example, some window frame materials such as wood composites, vinyl, and fiberglass may not be the best choice for buildings taller than four stories. Also, windows and doors with larger glazing areas may not be capable of achieving a U-factor of 0.30 or less. Other restrictions and limitations vary depending on each building and window selection, so it is recommended that you consult with an engineer or architect to consider what options are best for your property.

Heating and Cooling Systems

In addition to windows, doors, and skylights, other building components and products eligible for the tax credit include central air conditioning units, heat pumps, furnaces, boilers, water heaters, reflective metal and asphalt roofs, and insulation (including caulking, weather stripping, and foam sealants). Alternative energy components such as geothermal heat pumps, solar water heating and power, and biomass stoves are also eligible.

Tax Credit Limits and Time Periods

The 30% credit applies only to the product costs for exterior shell components, such as windows, doors, and insulation, but it covers both the product and installation costs for heating and cooling equipment. Individual taxpayers can claim up to $1,500 ($5,000 in costs) for all of their energy-improvement measures combined for 2009 and 2010. The items must be installed between January 1, 2009 and December 31, 2010. For alternative energy systems, however, there is no cap on the total tax credit, and the 30% credit applies to those products and components installed through 2016.

Condo and Co-op Owners

Condominium apartment owners and cooperative shareholders are eligible for the tax credit maximum based on their proportionate share of the costs for the project. So, for example, if a 100-unit condominium association paid $40,000 for replacement windows that met established energy-efficient standards, each unit owner's apportioned cost would be $400. The 30% tax credit for that project would therefore amount to $120 for each apartment owner. The tax credits for the window replacement project and other qualifying energy-improvement measures combined would max out at $1,500 per taxpayer for 2009 and 2010. The Residential Energy Tax Credit is claimed on IRS form 5695.

The American Recovery and Reinvestment Act extends previous previsions that granted residential property owners a 10% credit on energy-efficient improvements with a $500 lifetime limit. The new law also established higher performance standards for most of the components and systems qualifying for the Residential Energy Property Credit.

For more information on federal tax credits for energy efficiency, visit Energy Star's website at energystar.gov/taxcredits.

Disclaimer: RAND Engineering & Architecture, PC does not provide tax advice. Please consult an accountant or tax advisor for your and your property's specific tax situation.