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Question DetailsAsked on 12/19/2011

Is there a standard to calculate purchase price from a contractor's lump sum amount? IRS does not allow prep/install charges for energy tax

I had 9 replacement windows installed that will qualify for the 2011 energy tax credit. My contractor did not break down costs in the estimate to show the actual cost of the windows separate from installation costs. The IRS only allows the purchase price to be used as the credit. I thought there might be an industry standard calculation that would be acceptable for tax purposes.

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1 Answer


Unfortunately for you if you were to ever be audited you will need to have the actual purchase price for the auditor rahter than an estimate. Check this with an accountant as I am a contractor and not an accountant. Call the contractor and have him break it down for you. He should be fine doing this since it's not hurting the business deal and it's done anyway.

To answer your question directly: No there isn't an industry "standard." Many contractors will charge anywhere from 20-25% of te total job for overhead and profit. This will vary depending on if he is a small one man show and did the work himself or if he has sub-contractors/employees that do the actual work. You should ask your tax professional what they feel is best for documentation and call the contractor to get an itemized receipt. My guess is he's a small time outfit and didn't know in advance to offer you the broken down estimate you would be needing for this purpose. Either way he should be able to accomodate you. He'll want to keep you a happy customer if he is reputable so you will send referrals and call on him for other projects.

Answered 8 years ago by Todd's Home Services

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