How to Get a Tax Credit for New Windows

Homeowners making energy-efficient upgrades may be eligible for a federal tax credit designed to encourage reductions in home energy consumption. Installing new windows and skylights is one of the specified improvements that can qualify for this credit, helping to offset the cost of the enhancement.

Understanding Credit Eligibility and Limits

Taxpayer and Property Eligibility

To claim the credit, you must be a homeowner who owns and uses the property as your principal residence. Landlords and other property owners who do not live in the home are not eligible to claim the credit for rental properties. The home must be an existing structure located in the United States; new construction does not qualify.

Qualifying Window Requirements

The windows and skylights must meet specific technical standards to be eligible. The products must meet ENERGY STAR requirements and be produced by a manufacturer registered with the IRS. These standards are based on a product’s U-factor, which measures heat transfer, and its Solar Heat Gain Coefficient (SHGC). The required ratings can vary depending on the climate zone, so homeowners should consult the ENERGY STAR website for the specific requirements in their geographic area.

Covered Expenses

The credit can be claimed on the purchase price of the qualifying windows and skylights, including any sales tax paid. However, the costs for on-site labor to install the new windows are excluded from the calculation. For this reason, invoices must clearly separate the material costs from the installation fees.

Credit Calculation and Limits

The tax credit is 30% of the cost of the qualifying windows and skylights. This credit is officially named the Energy Efficient Home Improvement Credit and is subject to annual limitations. While there is a total annual limit of $1,200 for all combined home envelope improvements, there is a lower annual cap for windows. A homeowner can claim a maximum of $600 per year for the cost of new windows and skylights.

Essential Documentation for the Window Tax Credit

Manufacturer’s Certification Statement

You must obtain the Manufacturer’s Certification Statement, a document from the manufacturer attesting that the product qualifies for the tax credit. You should request this at the time of purchase. You will also need to obtain a Product Identification Number (PIN) for the windows, which is needed to complete your tax forms. Keep this statement for your records.

Purchase Invoices and Receipts

You must keep detailed purchase invoices and receipts to substantiate your claim. The receipt must clearly itemize the cost of the windows, separate from any charges for installation labor, as only the material cost is eligible.

Recordkeeping

The IRS recommends retaining all documentation for at least three years from the date you file the tax return. This includes the Manufacturer’s Certification Statement, itemized receipts, proof of payment, and the Product Identification Numbers.

How to Claim the Credit on Your Tax Return

Identify the Correct Form

To claim the window tax credit, you must use IRS Form 5695, Residential Energy Credits. This is the specific form for reporting these expenses. You can download the most current version of this form and its accompanying instructions from the IRS website. Using the correct year’s form is important as tax laws can change.

Completing Form 5695

The Energy Efficient Home Improvement Credit is calculated in Part II of Form 5695. You will need to enter the total cost of your qualifying windows and skylights, making sure to only include the material costs from your receipts. You are also required to include the Product Identification Number (PIN) for each product on the form. The form will then guide you through the calculation, applying the 30% rate and the specific annual dollar limit of $600 for windows.

Transferring to Form 1040

After you have completed Form 5695 and calculated the total amount of your credit, you must transfer this final figure to your main tax return. The total from Form 5695 is carried over to Schedule 3 (Form 1040), “Additional Credits and Payments.” This action officially applies the credit against your tax liability for the year.