Homeowners may qualify for a federal income tax incentive (in the form of a nonrefundable dollar-for-dollar tax credit) when they decide to make their homes more energy-efficient, reducing energy demand and heating/cooling expenses. If you’ve been asking whether your roof replacement is tax deductible, the information provided herein will guide you through the process.
Distinguishing Between A Tax Deduction And A Tax Credit
A federal or state income tax deduction lessens a taxpayer’s taxable income. Conversely, a federal or state tax credit directly reduces the amount a taxpayer owes dollar-for-dollar. Contrary to popular belief, these terms are not interchangeable.
A tax deduction does not automatically lower the total amount of tax a taxpayer owes in a given year. However, a tax deduction may impact the final tax amount a taxpayer must pay (depending on the taxpayer’s tax bracket for that specific year.)
A tax credit directly offsets the tax amount owed. Refundable and nonrefundable tax credits each can reduce the tax liability to zero. But only a refundable tax credit allows the taxpayer to receive any leftover tax credit amount back as a refund.
Is My Roof Replacement Tax Deductible?
Generally, for federal income tax calculation purposes, a homeowner cannot deduct the expense of a new roof. In nearly all scenarios, the act of replacing a roof is considered a home improvement. The Internal Revenue Service (IRS) does not typically consider a home improvement tax deductible.
However, the Inflation Reduction Act of 2022 provides homeowners a different incentive (in the form of a federal income tax credit) to enhance their homes in specific ways using Energy Star-certified home improvement materials. This opportunity encourages homeowners to reduce energy consumption.
The provisions under the Inflation Reduction Act of 2022 will continue to benefit homeowners through December 31, 2032. Many opportunities exist for homeowners to take advantage currently. Upgrading air conditioners, furnaces, water heaters, and exterior doors affords access to these tax credits.
Bolstering a home’s insulation or reducing air leaks provides a credit of up to $1,200* or 30% of the material cost (whichever amount is less.) These home improvements may encompass (i) weather stripping, (ii) spray foam or caulk designed to air seal, (iii) house wrap, and (iv) attic insulation.
Installing Energy Star-rated skylights generates a credit of up to $600* or 30% of the product cost (whichever amount is less.) *Annually, homeowners have a tax credit limit of $1,200 for home envelope improvements (i.e., insulation and skylights (as well as windows, doors, electrical, and HVAC).)
What Benefits Do I Receive From The Energy Star Tax Credit
Federal Income Tax Savings.
Eligible homeowners may claim a federal tax credit to reduce the federal income tax owed directly dollar-for-dollar. Most homeowners qualify for this tax credit when utilizing Energy Star-certified home improvement materials. A few exclusions apply. Consult your tax advisor for more information.
Decreased Energy Expenses.
More than any other reason, this federal tax incentive program assists homeowners in reducing their energy consumption and generating savings on their utility bills. By design, Energy Star-approved home improvement materials help homeowners more affordably transition to a clean energy future.
Improved Sustainability.
Nowadays, more homeowners seek ways to promote eco-friendly practices that lead to a greener environment. Utilizing Energy Star-certified home improvement materials reduces energy consumption, diminishing greenhouse gas emissions. The net positive environmental impact benefits the planet.
Added Home Value
An energy-efficient home enhances its curb appeal and increases its overall market value. The long-term benefits for a homeowner, including ongoing energy savings, give home buyers a sufficient reason to pursue an existing home equipped with Energy Star-labeled home improvement materials.
How Do I Ensure I Receive An Energy Star Tax Credit For My Home Improvement?
Only Select Energy Star-certified Home Improvement Materials From Qualified Suppliers.
An established, reputable manufacturer will affix the Energy Star label on home improvement materials that meet the Energy Star guidelines. A knowledgeable roofing contractor also understands what products qualify for this program (and what products do not adhere to this standard.)
Retain All Records (Including Receipts And Paid Invoices) Relating To The Purchase And Installation Of Roofing Materials.
Maintaining accurate records for tax purposes protects the homeowner’s best interests. Although the installation cost is not covered under this program, information confirming that the homeowner hired a contractor to perform any installation proves that the work occurred.
Consult With A Knowledgeable Tax Advisor To Walk Through The Process Successfully.
As a taxpayer, timely submission of the appropriate federal tax formwork (and any other required information) enables you to receive a tax credit under this program (assuming you qualify.) A reliable tax advisor can answer any questions that arise concerning this credit.
Who Should I Hire To Install A New Skylight Or Reduce Air Leaks?
At Point Roofing & Restoration, we expertly install Energy Star-certified skylights for Idaho homeowners. We also provide home improvement upgrades that air seal (reduce air leaks) in the roofing system. These services may qualify for federal income tax credits. Contact us today to learn more.
