Under the Inflation Reduction Act of 2022, consumers are entitled to federal income tax credits for buying and installing certain ENERGY STAR® windows, doors and skylights in their primary residential property. The Energy Efficient Home Improvement Credit is an annual credit of up to $1,200 to subsidize energy efficient home improvements. This tax credit covers 30% of product cost with an annual cap of $600 for qualified windows and skylights, and an annual cap of $500 for exterior doors with a limit of up to $250 for each door every year.
Since there is no lifetime monetary limit, homeowners and renters can claim this tax credit every year that they place new qualified products into service until the credit expires at the end of 2032. However, the tax credit can only be claimed for upgrades made to existing homes, including home additions or renovations, and is not eligible for newly constructed homes. And these tax credits are nonrefundable, so homeowners and renters will not receive money for an amount that exceeds their tax liability in any given year.
Exterior doors qualify for the tax credit if they are certified as a current ENERGY STAR product. All qualified doors will have a common ENERGY STAR label that makes it easy for consumers to see whether a product is certified, but the specifications for ENERGY STAR Version 6.0 certified doors can be found here.
Windows and skylights qualify for the tax credit if they are certified as ENERGY STAR Most Efficient for 2023. The ENERGY STAR Most Efficient 2023 designation is an extension of the ENERGY STAR brand with stricter criteria than Version 6.0 and only applies to a limited subset of window and skylight products. The ENERGY STAR Most Efficient 2023 specifications for windows varies by region and can be found here, while a comprehensive list of windows certified as Most Efficient for 2023 can be found here.
While there currently is no Most Efficient certification for skylights, the Environmental Protection Agency is in the process of developing Most Efficient specifications for skylights that will be released in early 2023 and will subsequently make them eligible for the tax credit.
Let’s look at some examples of how the Energy Efficient Home Improvement Credit is calculated. If a homeowner purchases and installs one ENERGY STAR exterior door at a cost of $1,000, along with two ENERGY STAR Most Efficient windows at a cost of $1,000 each, they will qualify for $850 in federal income tax credits. That includes $250 for the exterior door and $600 for the windows at 30% of product cost.
In another example, if a homeowner purchases and install two ENERGY STAR exterior doors at a cost of $1,000 each, along with one Most Efficient window at a cost of $1,000, they will qualify for $800 in federal income tax credits. That includes $500 for the two doors and $300 for the window at 30% of product cost.
As a final example, if a homeowner purchases and install two ENERGY STAR exterior doors at a cost of $1,000 each, along with two Most Efficient windows at a cost of $1,000 each, they will qualify for $1,100 in federal income tax credits. That includes $500 for the two doors and $600 for the window at 30% of product cost.
Photo Credit: iStockphoto/cstewart
By Jacob Carter
Window & Door Manufacturers Association (WDMA) Director of Government Affairs.
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