A tax credit that went away in 2016 was given a brief second chance at life in February 2018. That’s when the Bipartisan Budget Act of 2018 gave taxpayers an additional year to claim certain tax credits for residential energy-efficient additions to their home. One of these tax credits is for the installation or replacement of windows. But before windows can qualify for a tax credit, they must meet IRS qualifying standards, which are outlined in the federal Energy Star® program. And they even have to fulfill the definition of “window.”
When you purchase windows for your home, you may qualify for a valuable IRS tax deduction. In order to claim your windows as a deductible expense, they must first meet or exceed the specific requirements of the Energy Star® program.
Defining Windows for Tax Purposes
For a window to qualify as an allowable tax credit, its primary purpose must be to provide daylight and/or ventilation. Its construction must consist of a frame-and-sash component that holds one or more pieces of glazing. This includes skylights that also have the primary purpose of providing daylight and/or ventilation. Skylights can be sloped or horizontal along the roof. Even though the Energy Star® guidelines also include transoms, the IRS notes that qualifying windows and skylights must be located on the exterior of a house. The cost of the windows is deductible, but the cost of installation is not allowed.
Only windows in your primary residence qualify for the tax credit. Businesses and investment homes do not qualify.
Energy Star® Qualifying Windows
The IRS defines qualifying windows as those that meet or exceed the requirements in version 6.0 of the Energy Star® program. This tax credit also includes energy-efficient upgrades other than windows, such as insulation, high-efficiency waters and certain heating and air-conditioning systems. You can only claim 10 percent of the cost of qualifying windows, with a maximum allowable credit of $200. This $200 also represents a lifetime cap (during the years of 2006 through 2017) for windows, which is included in a lifetime cap for all allowable energy tax credits of $500. For example, this means if you've already claimed $500 for energy tax credits on your tax returns during the tax years of 2006 through 2016, you cannot claim any additional amount for windows that you may have added in 2017.
Claim Your Tax Credit on IRS Form 5695
Although this federal tax-credit extension ended on Dec. 31, 2017, you can still claim your energy tax credits by filing IRS Form 1040X (Amended U.S. Individual Tax Return). You cannot file this form electronically, but you can download it from IRS.gov/forms, and mail it to the address that's listed in the instructions. You'll have three years from the date you filed your original tax return to file an amended return and claim your energy tax credit for new windows.
- Consumer Reports: Make Sure You Can Get These Federal Energy Tax Credits
- IRS: Form 5695 - Residential Energy Credits
- Energy Star: Federal Income Tax Credits and Other Incentives for Energy Efficiency
- Energy Star: Product Specifications Windows, Doors, and Skylights - Eligibility Criteria Version 6.0
- IRS: Instructions for Form 5695
- IRS: Form 1040X - Amended U.S. Individual Tax Return
- IRS: Tips for Taxpayers Who Have to Amend a Return
Victoria Lee Blackstone was formerly with Freddie Mac’s mortgage acquisition department, where she funded multi-million-dollar loan pools for primary lending institutions, worked on a mortgage fraud task force and wrote the convertible ARM section of the company’s policies and procedures manual. Currently, Blackstone is a professional writer with expertise in the fields of mortgage, finance, budgeting and tax. She is the author of more than 2,000 published works for newspapers, magazines, online publications and individual clients.