Tax Credit for Buying Windows

Homeowners receive a tax credit when they replace old windows.

New Energy Star windows can reduce a homeowner's electrical bills by hundreds of dollars annually and lower his carbon emissions, according to the U.S. Department of Energy. Even better, homeowners can take a tax credit for certain window purchases up to limits set by the federal government under the authority of Section 26.250 of the United States Code. This provides more tax savings than a deduction.

Considerations

U.S. homeowners must purchase Energy Star-approved windows to take a residential energy efficiency credit. To qualify for the Energy Star program, window manufacturers must produce windows that block 70 percent or greater of heat from the sun during summer months and reflect sunlight and heat indoors during colder months. In technical terms, windows must have a U-factor of .30 or less and a solar heat gain coefficient of .30 or less, according to the IRS. The Energy Star sticker on qualifying windows has a blue background and white letters with the words "Energy Star" at the top.

Size

U.S. homeowners can take a tax credit for up to 10 percent of the purchase price of new Energy Star-approved windows and skylights. They do not have to replace all the windows in their homes to qualify for the credit, and federal law currently sets the maximum tax credit for windows at $200 as of August 2011.

Limits

An energy efficiency tax credit does not allow a homeowner to reduce his adjusted gross income below zero. If a taxpayer cannot take the credit due to a low adjusted gross income and excess deductions, he can choose to carry over his window tax credit into the next tax year, according to the Database of State Incentives for Renewables and Efficiency.

Warning

Taxpayers can only deduct the cost of energy efficient windows on their primary residence, and they cannot take a credit for installation costs or new construction, according to the U.S. Department of Energy. Interior windows do not qualify for the energy efficiency program. The federal window tax credit expires on December 31, 2011, but future sessions of the U.S. Congress may extend this credit.

Claim

Homeowners can claim a tax credit for windows on their federal tax report by completing Form 5695, entitled Residential Energy Credits, and attaching it to their Form 1040 federal tax return. They will claim the full cost of their windows on Part 1, line 2b, and will then complete the form up to line 11. When they find out their allowable credit, they will enter it on Form 1040, line 52.

References

• Database of State Incentives for Renewables and Efficiency: Residential Rewewble Energy Tax Credit; February 2011
• IRS.gov: Form 5695; 2010
• ENERGY STAR: Federal Tax Credits for Consumer Energy Efficiency; 2011
• ENERGY STAR: Benefits of ENERGY STAR Qualified Windows, Doors, and Skylights; 2009
• ENERGY STAR: ENERGY STAR Qualified Windows