ENERGY STAR™ Windows Could Make Federal Tax Credits Easy

In the Internal Revenue Service's (IRS) Guidance Notices for tax credits for existing residential, new homes and manufactured housing, published in February, there is a "special rule" (on page 7 of the IRS notice 2006-26) for claiming $200 residential efficient window tax credits with ENERGY STAR windows. According to Arlene Zavocki Stewart, with AZS Consulting, the rule allows taxpayers to treat an exterior window or skylight with an ENERGY STAR label, and installed in the region identified on the label, as an eligible building envelope component. The taxpayer may then rely on the ENERGY STAR label, rather than a manufacturer's certification statement, in claiming the §25C credit.

The rule is intended to make compliance with the IRS tax credit requirements easy for consumers, contractors and window manufacturers. Rather than wading through the windows technical requirements in the 2001 and 2004 International Energy Conservation Code (IECC) and obtaining a special manufacturers' certification statement, Stewart says, all parties can rely on the established regional ENERGY STAR window rating label.

The new IRS special rule for efficient windows is based on an Alliance to Save Energy and Efficient Windows Collaborative (EWC) report, The Tax Credit for the Installation of Energy Efficient Windows: Does the ENERGY STAR Help Consumers Find Products that Qualify? In an analysis of 3,111 U.S. counties, the Alliance to Save Energy and EWC showed the IRS and the U.S. Department of Energy that the ENERGY STAR label met or exceeded the International Energy Efficiency Code criteria in all but a small number of counties. They recommended that regional ENERGY STAR window labels serve as the qualifying criteria for the windows tax credits. According to Stewart, this recommendation was based on the large public awareness of the ENERGY STAR labeling program; the significant investment taxpayers have made in promoting the ENERGY STAR brand; and the simple and effective messaging that would result for promoting energy efficient windows to achieve the energy savings intended by Congress.

The Alliance report is available for download at the Tax Incentives Assistance Project website at

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