Tax Credits and Savings for Energy Conservation

A client is thinking about installing new windows. She asked about available tax deductions. There is a tax credit available for energy conservation. The credit is a reduction in federal income taxes up to $500 but only $200 for windows. So she can reduce her taxes by $200. Since it's a credit, it gets deducted right off her bottom line due. It would be like getting a $1500 itemized deduction.

Since she lives in Connecticut, she is also eligible for 0% sales tax on the windows. Connecticut has a sales tax holiday on windows and other energy conservation products until June 2007. This is like getting a 6% discount on the cost of the windows.

Most the tax credit and the sales tax holiday require that the windows be Energy Star rated. Most window manufacturers label their products as Energy Rated or not. A good vendor should be able to tell you if the windows are Energy Rated.