Do You Get A Tax Credit for New Home Windows?
Replacing the windows in your home is one of the best ways to improve energy efficiency and reduce utility bills. However, it can also be an expensive project depending on the number of windows, types installed, and other factors. To help offset some of those high upfront costs, homeowners may be able to take advantage of federal tax credits designed to incentivize energy-saving home improvements like window replacements.
The availability and amount of these tax credits has fluctuated in recent years as different policies have been implemented and expired. Let's take a look at the current tax credits homeowners can utilize for window replacement projects in 2023 and 2024.
Federal Energy Efficient Home Improvement Credit
As part of the Inflation Reduction Act passed in August 2022, Congress created an enhanced residential tax credit aimed at promoting energy efficient home upgrades. The Energy Efficient Home Improvement Credit offers a 30% tax credit for a variety of projects, including:
- Exterior windows & skylights
- Exterior & storm doors
- Insulation & air sealing
- Electrical panels & wiring
- Heating, cooling & ventilation systems
The 30% credit rate applies annually to the total eligible costs across all of those home improvement categories each year from 2023 through 2032. There is an annual cap of $1,200 (or $2,400 for couples filing jointly) on the total credits that can be claimed.
However, window replacements have a separate specific cap under this program. The credit for installing energy efficient exterior windows and skylights is capped at $600 per year, even if 30% of the window costs exceeds $600.
See: Do You Need A Permit To Replace Windows?
Qualifying Window Types
To be eligible for the 30% tax credit (up to $600), the windows installed must carry an Energy Star Most Efficient certification for the homeowner's local climate zone. This Energy Star designation is awarded by the U.S. Environmental Protection Agency (EPA) to only the most energy efficient window models on the market.
Energy Star certified windows are independently tested and rated based on attributes like:
- U-Factor: This measures the window's insulation value, with lower numbers indicating better thermal performance to reduce heat transfer.
- Solar Heat Gain Coefficient (SHGC): This rating looks at how well the window blocks unwanted heat from the sun.
- Air Leakage: Windows are tested to measure drafts and air infiltration rates.
- Condensation Resistance: The ability to resist water buildup on interior surfaces.
The specific Energy Star rating criteria that windows must meet varies in different regions based on heating and cooling needs. But in general, homeowners should look for Energy Star windows with double or triple pane insulated glass, low-emissivity coatings, inert gas fills, and non-conductive frame materials like vinyl or wood.
Both full window replacements and installation of new windows/skylights where none existed before can qualify for the tax credit as long as the Energy Star requirements are met.
Example Tax Credit Calculations
To illustrate the potential tax savings, let's look at how the credit could apply to some example window projects:
Example 1:
- A Kansas homeowner pays $9,000 to replace 10 double-hung windows with ENERGY STAR Most Efficient vinyl models.
- Federal Tax Credit: $600 (30% of $9,000 is $2,700, but credits are capped at $600 for windows)
- With the $600 tax credit, the homeowner's net window cost would be reduced to $8,400.
Example 2:
- A New York couple pays $15,000 to replace all 20 windows in their 2-story home with qualified ENERGY STAR triple-pane windows and add two new skylights.
- Federal Tax Credit: $600
- NYS Tax Credit: $1,500 (25% of project cost up to $10,000 cap)
- Utility Rebates: $500 (Common amount from local utilities)
- Total Tax Credits & Rebates: $2,600
- With the combined $2,600 in incentives, the couple's final window cost is reduced to $12,400.
As the examples demonstrate, the tax credits make investing in energy efficient home windows more affordable, even if they don't cover the full replacement cost. Over time, the new windows will also lead to lower heating and cooling bills to further offset the upfront investment.
Claiming the Window Tax Credit
To receive the Energy Efficient Home Improvement Credit for window replacements, homeowners should retain all invoices, contracts, and energy performance labels/certifications from the window manufacturer. This documentation will need to be submitted along with IRS Form 5695 when filing your taxes for the year the project was completed.
It's also recommended to use qualified contractors who are familiar with the tax credit program requirements and ensure the proper rated windows are installed. Many state/utility rebate programs have a similar accreditation process for participating contractors.
Be sure to fully explore all available incentives at the federal, state, utility and manufacturer levels. While there are caps for the federal window credits, combining them with other rebates can substantially increase the overall tax savings.
With inflation driving up the cost of home improvements, the new tax credits provide much-needed financial relief to make energy efficient upgrades like window replacements more accessible. Taking advantage of these incentive programs allows you to reduce your environmental impact and utility bills while also increasing home comfort and value.
The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
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