1500 Energy Tax Rebate
on windows, doors, furnaces and skylights

As of February 2009, upto $ 1500 energy tax rebate can be claimed on the purchase of Energy Star doors, windows and skylight. This is an opprtunity to upgrade your home. On December 31st 2010 this "1500 energy tax rebate" provision was drastically reduced - see the paragraph bellow

2011 Tax Credit Changes

The generous $1500 energy tax rebate that was available for tax years 2009 and 2010 is not available any more. In lieu, much less generous tax provisions were approved for tax year 2011.
Households that have applied for the 2009-2010 generous tax credits cannot re-apply for the new 2011credit.
The new energy efficient tax credit is only a 10% credit (compared to 30% in 2010), up to a maximum of $500 (rather than the generous $1,500 that was valid until December 31st 2010.)

Of that, only $200 for Energy Star windows can be applied.
For exterior doors, you may be qualified for a 10% credit up to $500
Even for these lean tax credit there are rules you need to follow to be eligible:
The doors & windows are used to improve existing homes home energy efficiency (not new homes though), meet the Energy Star criteria, and “put into service” in the “main residence” of the applicant taxpayer before December 31st 2011.
Furnaces are only allowed to get a $200 credit and they must now be 95% efficient. (more demanding than the 90% 2009/10 requirement)
Wood heating systems are eligible for a max $300 credit.

I reiterate my advice to use the window of opportunity on the generous no-limit 30% home solar power and home wind power energy tax credit before it expires, presumably in 2016 or before the legislators changes their mind, whichever comes first.

The Tax Credit Guidelines

Here are the guidelines describing the points to pay attention to:

The $ 1500 energy tax credit is on purchase (not installation though) of doors, windows and skylights . The tax rebate is 30% of the goods value. The maximum tax credit is $1500.
To qualify, the windows, doors and skylight should have a U-factor and Solar Heat Gain Coefficient (SHGC) less than 0.3. You can see it on the label of the NFRC (National Fenestration Rating Council)
The $1500 1500 energy tax rebate is on all home improvements (roofing, insulation, etc.)combined, applicable to 2009 and 2010.

How to claim the 1500 energy tax credit

Purchase and install any replacement window, patio door, or entry door with a U-Factor and SHGC of .30 until December 31, 2010.
Save your receipt and each window and door performance label (NFRC label)
Claim your tax credit on your 2010 Federal tax return
If you already purchased and installed eligible windows and doors in 2009 and you retained the receipts and NFRC labels - claim you tax credit on the 2009 tax return

Here is the required performance level as defined by the NFRC

Interpreting the NFRC Label (Sidebar)

The certification mark in the upper left-hand corner of the label indicates that the product has been certified in accordance with NFRC standards. In the upper right-hand corner is a description of the product provided by the manufacturer.
The bottom of the label gives the address of the NFRC web site as a source for additional information.

Rating of Windows

U-factor measures how well a product prevents heat from escaping a home or building, and generally falls between 0.20 and 1.20. The lower the U-factor, the better a product is at keeping in heat.
Solar heat gain coefficient (SHGC) measures how well a product blocks heat from the sun. SHGC is expressed as a number between 0 and 1. The lower the SHGC, the better a product is at preventing unwanted heat gain

To get more insight, view my page on energy efficient replacement windows buying tips

A Window of Opportunity

You can buy windows, doors, skylights and furnaces until December 31st 2010 for $5,000 and get back $1,500 as an IRS tax credit. Don't miss that opportunity. Your older windows may be subtly leaking through micro-cracks. If you notice excess condensation or leaks near your windows, the reason might be that moisture is getting into your walls. This is the time to replace the windows; your energy bills will get down, you will avoid mold build up and the IRS will participate in the investment

The Future

With the expiration date in sight, will it be the end of the 1500 energy tax rebate or will it be extended?

Earlier in 2010, the House passed a provision for a similar tax credit that would amount to $3,000, nicknamed “Cash for Caulkers.” The proposed tax bill is waiting for the Senate approval.

The bill advocates a two-tiered structure for energy-efficiency rebates.

Its Silver Star program tier would provide up to $3,000 per home in tax rebates for home energy related improvements, such as better insulation, efficient HVAC units, energy efficient windows and alike.
The Gold Star program tier would start at $3,000 rebates for even more aggresive energy retrofits achieving at least 20% energy savings, while rebates up to $8,000 per home can be claimed on retrofits achieving 45% energy savings.

At the time I write this, there are strong hopes the bill will pass, however it is not guaranteed. Therefore, I strongly advice to take advantage of the existing provisions of the 1500 energy tax rebate as were outlined above, before the end of 2010