Energy-Efficient Window Tax Incentives: What Homeowners Need to Understand
The federal government's Energy Efficient Home Improvement Credit offers a valuable tax break for homeowners looking to upgrade their windows to energy-efficient models. Here's what you need to know about this credit and how to claim it.
Under the Section 25C Energy Efficient Home Improvement Credit, homeowners can currently claim up to **30% of the cost of eligible windows each year**, with a limit of $600 per year for exterior windows and skylights. This credit applies to windows meeting Energy Star certification, but to qualify for the maximum credit, windows must meet the ENERGY STAR Most Efficient criteria, a higher standard than the regular ENERGY STAR certification.
To be eligible for the tax credit, the windows must be installed in your primary residence. Rental properties, vacation homes, and second homes are ineligible. The NFRC label, which indicates that your windows meet the minimum performance thresholds, is all that counts. Brand names, colors, or special features like between-the-glass blinds do not factor into IRS eligibility.
The tax credit is a nonrefundable credit, reducing your tax bill dollar for dollar, but if the credit is larger than what you owe, you can't get money back. The current law allows homeowners to claim this credit through 2032, but recent legislative developments may change this duration. A House bill proposes to eliminate energy-efficient home improvement credits, including for qualified windows, after December 31, 2025. If this bill is enacted, 2025 would be the last year to claim these credits for window upgrades. The Senate's position could further affect this timeline, so it is important to monitor any final legislation.
To claim the credit, you need specific documentation, including the manufacturer's certification statement and an itemized receipt separating materials from labor costs. You can claim the credit even if you install the windows yourself, but you must have all necessary documentation proving your windows meet ENERGY STAR Most Efficient standards.
The credit applies to traditional windows, skylights, and exterior doors with windows. Obtain the ENERGY STAR label or certification number for each window and keep photos as backup documentation. Use IRS Form 5695 to claim the credit, entering window costs in Part II under "Energy Efficient Home Improvement Credit". Gather all necessary documentation, including itemized receipts, manufacturer certification statements, and NFRC labels, early to avoid last-minute scramble.
It's important to note that the credit covers 30% of your window material costs, up to $600 annually, but labor costs are not included. Both replacement windows and new construction windows can qualify for the tax credit. The qualification requirements for windows depend on your climate zone.
If you have multiple home energy audits or energy-efficient upgrades across different energy systems, consult a tax professional for guidance on pairing credits. Given the current uncertainty regarding the future of this tax credit, homeowners planning energy-efficient window upgrades should consider acting soon if they want to ensure access to the credit and should consult a tax professional for current eligibility and advice.
Consult a contractor who specializes in energy-efficient window installation to help you understand the ENERGY STAR Most Efficient criteria and select the right windows for your home. In your personal-finance planning, consider setting aside funds to cover the eligible window costs, since only the material costs (up to $600 per year) are covered by the Energy Efficient Home Improvement Credit, and labor costs are not included.
