Are Your Hurricane Windows Tax Deductible?

Hurricane windows offer homeowners protection against severe weather. Many homeowners wonder if investing in these improvements can provide financial benefits through tax deductions or credits. While tax benefits for home improvements can be intricate, some provisions may offer savings.

Understanding Tax Benefits for Home Improvements

Most home improvements, including hurricane windows, are not immediately tax deductible in the year they are made. Instead, these expenses typically increase the “cost basis” of your home. Cost basis is your original purchase price plus capital improvements. For example, if a home was purchased for $300,000 and $50,000 was spent on qualifying improvements, the new cost basis would be $350,000.

This increase in cost basis is beneficial because it reduces the taxable profit, or capital gain, when you eventually sell the home. A higher cost basis means a lower calculated gain, which can lead to a reduced capital gains tax liability. This differs from a tax deduction, which directly reduces your taxable income, or a tax credit, which directly reduces your tax liability dollar-for-dollar. While direct deductions for home improvements are rare for personal residences, tax credits offer a more likely avenue for tax benefits related to energy-efficient upgrades.

The Energy Efficient Home Improvement Credit

The Energy Efficient Home Improvement Credit offers a tax credit for qualified energy-efficient improvements. It equals 30% of the cost of qualified energy efficiency improvements installed during the year. It applies to property placed in service from January 1, 2023, through December 31, 2032.

For exterior windows and skylights, the credit is limited to $600 annually. To qualify, these windows must meet the ENERGY STAR Most Efficient certification requirements. There is an overall annual limit of $1,200 for combined energy property costs and other energy-efficient home improvements, which includes windows and doors. This credit is nonrefundable, meaning it can reduce your tax liability to zero, but you will not receive a refund for any excess credit amount.

Claiming Your Tax Credit and Record Keeping

To claim the Energy Efficient Home Improvement Credit, taxpayers must use IRS Form 5695. This form is submitted along with your federal income tax return, Form 1040. The form is divided into sections, and you will complete the portion relevant to energy-efficient home improvements.

When filling out Form 5695, you will enter the costs for qualified energy-efficient property. Accurately report all costs, ensuring they align with your receipts and documentation. Maintain thorough records, including receipts for materials and labor, and manufacturer certifications confirming windows meet ENERGY STAR Most Efficient standards. For windows installed on or after January 1, 2025, new requirements will mandate including a Product Identification Number (PIN) assigned by the manufacturer on your tax return to claim the credit.

Casualty Loss Deduction for Damaged Windows

If existing windows are damaged due to an event like a hurricane, a casualty loss deduction might be available. For individuals, personal casualty losses are generally deductible only if the loss is attributable to a federally declared disaster. This means the event causing the damage must have occurred in an area designated as a federal disaster by the President.

Previously, these losses were subject to a $100 reduction per casualty event and a 10% of Adjusted Gross Income (AGI) limitation. However, recent legislation has provided relief for “qualified disaster losses” declared between January 1, 2020, and February 10, 2025. For these specific qualified disasters, the 10% AGI limitation is eliminated, and the reduction per casualty is increased to $500, with the deduction potentially added to your standard deduction, meaning itemizing is not required. Form 4684 is used, and detailed documentation of the loss, including FEMA declaration numbers, is necessary.