Federal Tax Credit for Energy-Efficient Windows
Lower your federal tax bill with the Energy Efficient Home Improvement Credit for windows. Understand the eligibility rules and the process for filing.
Homeowners who install new, qualifying energy-efficient windows may be eligible for a federal tax incentive to help offset the cost. This financial incentive is part of the broader Energy Efficient Home Improvement Credit, designed to encourage residential energy conservation. The credit is available for improvements made through 2032 and allows taxpayers to reduce their tax liability by making specific upgrades to their primary residence.
Credit Amounts and Limitations
The Energy Efficient Home Improvement Credit allows homeowners to claim 30% of the cost of new energy-efficient windows. This credit is subject to a specific annual cap of $600 for windows and skylights. For example, an expenditure of $2,000 on qualifying windows would result in a $600 credit, while an expenditure of $1,500 would result in a $450 credit.
This $600 limit for windows falls under a broader annual limit for the entire Energy Efficient Home Improvement Credit. The total credit for all eligible improvements, including items like doors and insulation, cannot exceed $1,200 per year. A separate, higher limit of $2,000 annually applies to specific items like heat pumps. These limits reset each year, allowing for strategic planning of larger home improvement projects.
When calculating the amount to claim, the credit for windows applies only to the cost of the materials themselves. The expenses associated with the labor for installing the new windows are not eligible for this portion of the credit. An itemized receipt that separates the cost of the windows from the installation charges is necessary.
Qualifying Window and Home Requirements
Eligibility for the tax credit depends on meeting requirements for both the property and the windows themselves. The credit is only available for improvements made to an existing home that serves as the taxpayer’s principal residence. New construction homes and residential properties that are rented out are not eligible for this tax credit.
The windows must meet energy efficiency standards defined by the ENERGY STAR program to qualify. For the credit available from 2023 through 2032, windows and skylights must meet the ENERGY STAR Most Efficient certification requirements. These technical specifications relate to factors like the U-factor, which measures heat loss, and the Solar Heat Gain Coefficient (SHGC), which measures how much solar radiation is admitted through a window.
The required performance levels can vary based on the geographic location of the home. To determine the specific requirements for their area, homeowners should consult the ENERGY STAR Climate Zone Finder on the program’s website. This tool helps identify the applicable standards for a particular address.
Required Documentation and Information
Taxpayers must retain detailed, itemized receipts from the seller that clearly distinguish the cost of the window products from any installation labor charges. This is because only the cost of the windows themselves is eligible for this credit component.
A key piece of documentation is the Manufacturer’s Certification Statement. This is a signed document from the manufacturer attesting that the specific window model meets the required energy efficiency standards. Homeowners can find and download these certification statements from the manufacturer’s website.
For windows placed in service starting in 2025, the window’s manufacturer must be registered with the IRS. Taxpayers will also need to include the product identification number for the windows on their tax return when claiming the credit.
The taxpayer will report the expense on IRS Form 5695, Residential Energy Credits. This form is used to calculate the total amount of the credit for all qualifying home improvements and is filed with your annual tax return.
How to Claim the Credit
The completed Form 5695 must be submitted as part of your annual federal income tax return, which is typically filed using Form 1040. The tax software or tax professional you use will integrate Form 5695 into your overall tax filing.
The total credit amount calculated on Form 5695 is then transferred to the appropriate schedule attached to your Form 1040. This credit directly reduces your tax liability, meaning it lowers the amount of tax you owe dollar-for-dollar. For instance, if you owe $3,000 in taxes and have a $600 credit, your final tax bill is reduced to $2,400.
This credit is nonrefundable, which means it can reduce your tax liability to zero, but you will not receive any portion of it back as a refund if the credit amount exceeds your total tax owed. There is no provision to carry forward any unused portion of the credit to future tax years.