If it’s time to replace your siding, this investment in your home may make you wonder if you can apply for a siding replacement tax deduction. However, with new siding, tax benefits may or may not be available.
Home siding tax credits will depend on the energy-efficient siding savings provided by the materials chosen. When you need to make this home improvement, you shouldn’t put it off. Understanding when and how you may be able to get tax deductions for the project may help you put money back into your own pocket on this investment.
In this blog post, Pinnacle Home Improvements, a reputable siding contractor, explains tax deductions for home improvements and whether or not your siding project qualifies.
Understanding Tax Deductions for Home Improvements
According to the IRS, if you make qualified energy-efficient home improvements after January 1, 2023, you may qualify for a tax credit up to $3,200. The home needs to be your primary residence, and the improvements you make to your home must boost its energy efficiency.
Replacing the siding on your home may not qualify for such tax deductions. The materials used must enhance the home’s energy-conserving capabilities. If you need to make any improvements to your home, you should consider whether or not they are energy-efficient. You may get a tax break, and you’ll also enjoy long-term energy savings over your years of homeownership.
Specifics on the Tax Deductibility of New Siding
For many homeowners, a siding replacement project is not going to be a tax-deductible qualification. However, if you choose siding that is energy efficient, you may qualify for federal tax credits.
Standard siding comes at a lower installation cost compared to insulated vinyl siding, though understanding the insulated vinyl siding cost and value can help you see the long-term benefits. Over time, you stand to save more by putting in more upfront during the installation and adding the insulation materials.
When you choose insulated siding that improves home energy efficiency, it can qualify for a 30% tax credit, or up to $1,200 in savings per year. If you choose insulated siding materials that are ENERGY STAR rated, you will likely be able to take advantage of the tax credits.
Current Laws and Regulations Regarding Energy Efficiency Tax Credits
The IRS states that any insulation materials that meet International Energy Conservation Code (IECC) standards may qualify. When materials are installed in 2025, they must be compliant with the standards that were put into effect on January 1, 2023.
The maximum credit limit is $1,200, and anything related to insulation or air sealing does not have to meet qualified manufacturer requirements. Labor costs invested do not qualify as part of the credit.
Exceptions and Limitations for Siding Deductions
Every homeowner should understand that the majority of home improvements aren’t tax-deductible, especially if they are merely cosmetic. You may be able to qualify for some tax benefits related to siding if it can be shown that you have used an energy-efficient insulating material.
Some states may have incentive programs that could provide tax credits or rebates when you make energy-efficient upgrades to your home. Since tax laws often change from year to year, it’s a good idea to consult with your accountant to learn more about what you can and can’t deduct when improving your home. If your siding project may be eligible for tax deductions, your accountant can also tell you what documents you’ll need to apply for these credits.
How to Properly Document and Claim Siding Deduction on Taxes
In order to claim a tax deduction for installing new siding on your home, you should check your eligibility first. Your home must be located in the U.S., owned by you, and used as your primary residence.
You also need to validate that the materials used are eligible, which your siding contractor can assist with. Once you’ve had the products installed, you will want to keep records through documentation. The IRS won’t require them to be filed with your tax return, but if you get audited, it will ask you to submit proof. Tuck the ENERGY STAR labels and the receipts of your purchase away just in case.
When tax time rolls around, your accountant will have you file Form 5695 along with your tax return to receive tax credits for this home improvement project.
Advantages of Investing in Quality Siding
When you invest in quality siding, you will first notice the immediate advantage of how it instantly and dramatically improves your home’s curb appeal. It will look like new with a fresh presence on your block that increases its overall value, not to mention, it will attract potential buyers if you’re planning to move soon.
While beauty may be the first benefit you’ll notice with the installation of your new siding, you’ll soon reap the energy-saving benefits. If you’ve selected insulated siding, you will significantly reduce your heating and cooling costs. The insulation installed with siding improves thermal regulation for greater energy efficiency.
Siding enhances the protection of your home, keeping weather, moisture, and pests out of the interior. When siding is damaged or aged, it can allow water intrusion, which leads to costly problems for any home.
Adding new siding will reduce your need for maintenance, and when you choose vinyl siding, you’ll find it’s even easier to take care of over the years. It really only needs to be hosed off with gentle water pressure to keep it looking clean.
Investing in your home with any improvement project isn’t cheap, and when you add insulation to your siding, it will cost more. However, when you use high-quality materials, you gain more advantages over the long term. You’ll spend less maintaining it, you’ll conserve energy, and you may be able to qualify for tax credits by using ENERGY STAR-rated siding materials.
Insight into the Installation Process
Most people don’t know how to hang vinyl siding, and while you might be eager to learn, you must be careful not to compromise the materials to ensure their protection, longevity, and energy efficiency. It’s very tricky to install vinyl siding around windows, and mistakes can lead to gaps or uneven panels.
Pinnacle Home Improvements provides a free estimate when we come to assess your existing siding and make recommendations for your installation. If you want to further enhance your energy efficiency, we can discuss insulated vinyl siding, its benefits, and how you may be able to get tax credits for making this home improvement.
Insulated or not, vinyl siding comes in a variety of stunning colors, styles, and textures. You may feel overwhelmed by these options, but we will walk you through the entire selection process to help you find a match for your home’s architectural elements.
Siding installation can’t begin until the old siding is removed first. This will expose the wall sheathing, and the surface of the walls will need to be cleaned and inspected for damage. If any issues are found, they will need to be repaired first to protect your home’s structural integrity.
Flashing will be installed around the openings, such as your doors and windows, and a house wrap will protect your walls. Some siding comes insulated, while other types can have insulation added with the panels. With our reputable siding contractors, you can rest assured that we follow proper procedures and protocols to ensure the insulation and siding are all installed correctly.
Common FAQs Related to Siding and Tax Deductions
Is all siding insulated?
No, not all siding is insulated, and while some types of siding, like wood, are naturally good insulators, it is more beneficial to add insulation with siding installation.
How do I get a tax deduction on siding?
If you want to deduct your siding installation from your taxes, you should first make sure that you have chosen insulated siding. With ENERGY STAR materials, you will have a better chance of qualifying for the tax credits available for energy-efficient home improvements.
How do I make records of my siding home improvement project?
You can organize all the receipts associated with your siding replacement project in one place. Generally, your siding contractor will provide a service contract with all these details, which should specify the materials used in the siding replacement. Before the contractor starts, it is a good idea to make sure you have proof that the products used for your siding project are ENERGY STAR-rated.
Additionally, you should have proof of payment for the project. Make copies of the originals and store them in a safe place. It can be beneficial to have before and after photos of the new siding; however, since the focus for your tax credits is on energy efficiency rather than appearances, it will likely be unnecessary.
Is it worth it to upgrade to energy-efficient siding?
Energy-efficient siding costs more, but it is worth it to make this investment in your home. It will improve your home’s insulation, which will result in lower heating and cooling costs. You’ll increase the value of your home, and when installed with insulation, your siding can help you get tax deductions.
