How to Get the Window Replacement Tax Credit for 2024

The Energy Efficient Home Improvement Credit provides an incentive for homeowners who invest in making their properties more energy-efficient. This tax benefit, modified by the Inflation Reduction Act of 2022, is designed to offset a portion of the costs for specific upgrades, including the installation of new windows. The credit encourages improvements that reduce energy consumption, ultimately lowering utility bills and enhancing home comfort.

Qualification Criteria for the Credit

Taxpayer and Property Requirements

To be eligible for the credit, you must be a homeowner who is making improvements to your primary residence. This means the home must be the one you live in for most of the year; second homes or properties you rent out to others do not qualify. The credit applies specifically to existing homes, so costs related to new construction are not eligible.

Window Technical Specifications

The windows must meet very specific technical requirements set by the ENERGY STAR program. To qualify, windows and skylights must meet the ENERGY STAR Most Efficient certification requirements. It is important to understand that this is a higher standard than the basic ENERGY STAR label, so you cannot assume any certified product is eligible. Homeowners should verify this detail before purchase by checking the product’s specifications and looking for it on the ENERGY STAR website’s certified products list.

Understanding the Credit Value and Limits

The credit is calculated as 30% of the amount paid for the qualifying windows. For exterior windows and skylights, the maximum credit you can receive in a single tax year is $600. This $600 limit for windows is part of a general $1,200 annual limit for most home envelope improvements, such as new doors and insulation. A separate, higher annual limit of $2,000 is available for certain clean energy equipment, like electric heat pumps and biomass stoves. This means the total potential credit a homeowner can claim in a year could be as high as $3,200.

For example, if you spend $3,000 on qualifying windows, 30% of that cost is $900. Because of the annual cap, your credit would be limited to $600 for that year. A detail in the calculation is that the cost of on-site labor for installation is not included, as the 30% calculation applies only to the price of the windows themselves.

This benefit is a nonrefundable tax credit. This means it can reduce your income tax liability dollar-for-dollar, but only down to zero. If the credit you are eligible for is more than the tax you owe, you will not receive the difference back as a cash refund, and the excess credit cannot be carried forward to a future tax year.

How to Claim the Credit on Your Tax Return

Information and Document Preparation

You must keep detailed purchase receipts or invoices that itemize the cost of the windows, separate from any installation labor charges. In addition to receipts, you must have proof that the windows qualify. For all qualifying windows, you must obtain and retain the Manufacturer’s Certification Statement for your records. This is a document from the manufacturer attesting that the product meets the necessary energy efficiency standards.

For windows installed on or after January 1, 2025, there is an additional requirement. You must also obtain a Product Identification Number (PIN) for each window from the manufacturer and include these PINs on your tax return when you file.

Form Completion and Filing

To claim the credit, you must complete and file IRS Form 5695, Residential Energy Credits. The costs for your qualifying windows, as shown on your receipts, are entered on this form. Once Form 5695 is completed, it must be submitted with your annual federal income tax return, typically Form 1040. The total credit calculated on Form 5695 is then transferred to the appropriate line on your Form 1040, where it will reduce your total tax. The credit is claimed for the tax year in which the windows were installed, not necessarily when they were purchased.