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Saving Money on your Replacement Windows through Government Tax Incentives

The American Recovery and Reinvestment Act of 2009

The Recovery and Reinvestment Act of 2009 was signed into law by President Obama on February 17, 2009 and offers many benefits for increasing the efficiency of residential, commercial and industrial construction materials. Most importantly, it provides tax incentives for each piece of equipment that conforms to standards of energy efficiency. It falls under the purview of the Environmental Protection Agency and is directed by the Energy Star program. One of the Act’s provisions for receiving government money for new windows, applies to any replacement windows that are installed between January 1, 2009 and December 31, 2010.  Homeowners who have put in energy efficient replacement windows can receive a tax credit of 30% of the windows’ cost (not including installation), up to $1500. The credit is only accessible if the windows purchased and installed in a pre-existing home meet the requirements outlined in the Act: U-factor and SHGC (Solar Heat Gain Coefficient) or less than or equal to .30

See the Replacement Windows Ratings Page via our Knowledge Center for more information on these ratings required for tax credit eligibility

Visit Energy Star and the EPA ’s official website on this news.

Tax Credit versus Tax Deduction

One benefit of the Act is that it provides for a tax credit, rather than a tax deduction. A tax deduction simply eliminates a percentage of overall taxes owed by subtracting a sum before your tax liability is calculated. A tax credit, like the $1500 that the Recovery and Reinvestment Act provides will remove taxes dollar for dollar and is subtracted from your total tax liability after all calculations have been made. A tax credit will generally benefit a taxpayer three times the amount a deduction would.

Also see the Internal Revenue Service’s official site pertaining to the American Recovery and Reinvestment Act for Individuals.

Energy Star

Not all energy efficient windows are subject to this tax incentive. Only those windows that have been designated as “Low-E” and approved by the Energy Star program are eligible for the tax benefit. All Energy Star-approved products are labeled with an insignia you will probably recognize from window panes, as well as energy efficient computer monitors. Energy Star windows meet the highest standard of efficiency and have been tested and approved by the EPA.

Energy Efficiency Incentives

People might not feel that a $1500 dollar tax credit is incentive enough to motivate people to install energy efficient windows. However, there are a number of factors that the EPA and replacement window manufacturers are counting on:

  1. Energy costs have been on the rise for years, and spiked especially high in late 2005. Replacement windows might be expensive to some, but they will exponentially decrease the amount of money you pay for heating and cooling your home as energy costs rise further. To this end, many window manufacturers will agree to match the $1500 tax credit with another bonus, giving a total of well over $2000 in savings.
  2. While it differs from region to region, the amount of money saved annually by installing Low-E, Energy Star windows can be substantial. For single-pane windows, it can be between $146 and $465, double pane windows, $27 and $111, and for newly constructed homes, $20 and $85. While this and a $1500 tax credit might not seem like large sums on their own, together they represent significant savings.
  3. Many people who purchase energy efficient windows, solar panels, and other products that offset energy consumption and cost are interested as much or more in civic responsibility and environmentalism. Energy Star-approved windows are an excellent way to show that you care for the environment and understand the strain that high energy prices place on society.
  4. Ultimately, if $1500 is not enough to entice people to install Low-E windows, it will at least alert them to the fact that such windows exist. If they can one day afford them, they may well take advantage of the tax credit.

Incentive Claiming Process

As of May 2006, the IRS has yet to release pertinent forms for registering your energy efficient window installation. They also have yet to announce when those forms will be available or even what shape the process for registration will take. However, the Recovery and Reinvesment Act language makes it clear that any installations from January 1, 2009 to December 31, 2010 will be eligible. Therefore, you should keep documentation of any windows you have put in during that span and be patient. You may also want to keep records of any other remodeling or construction that improves the energy efficiency of your home. Projects like adding insulation and installing Heating, Ventilation or Air Conditioning will also merit tax credits.

The U.S. Department of Energy maintains a website on The American Recovery and Reinvestment Act of 2009.

Visit our forum for the latest discussion on the Replacement Window Energy Tax Credit

Replacement Windows Energy Tax Credit History
Read about how 2005 Energy Tax Credits were setup.