As Congress debates the details of the Home Star bill many people have asked the question of which federal program is better for them – Home Star or the Tax Credit program. Many consumers have delayed their buying decision until they learn whether Home Star will ever be passed and if so, what the final language will mean to them. As with most decisions like this, there isn’t a clear-cut answer. It really depends on your situation.

The American Recovery & Reinvestment Act of 2009 (ARRA) created a tax credit for homeowners who replaced their old windows with new energy efficient replacement windows. The tax credit allowed the homeowner to receive a credit of 30% of the window cost (excluding installation), with a maximum of $1,500. The money would come in the form of a tax credit on your tax returns. As with most tax credits, it reduces your tax liability. If you have no taxable income or tax liability that can be reduced, you wouldn’t receive a benefit. For the average working class person, this tax credit is a significant incentive and would increase their tax rebate or reduce their tax payment in April.

The Home Star Energy Retrofit Act of 2010 is a bill that is being debated in Congress now. It isn’t clear whether this will ever become a law or not. So, there is a risk is waiting to see if it gets passed because the tax credit program expires on 12/31/10. You don’t want to miss out on both of these programs. The draft language of Home Star proposes upfront refunds on energy efficiency upgrades to your home. This could include windows, insulation, water heaters, HVAC, etc. Replacing windows would potentially offer a rebate of $1,000 if 8+ windows were replaced (or 75% of the windows in the home). This $1,000 would be taken off of the contract price from the home improvement company who sells you the windows. They would then apply for a refund from the government. This is similar to the Cash for Clunkers program that car dealerships offered.

The program that is best for you depends on your individual situation. The pros for the tax credit are that it exists today and the rebate amount for windows is higher. Home Star, if passed, would provide a lesser amount for windows, but it would be upfront money. Home Star would also have the benefit of allowing you to do multiple efficiency upgrades at one time to allow for an even higher rebate. e.g. – You could replace your windows, add insulation to your attic and add a solar hot water heater. This might result in several thousand dollars in discounts, but you’d have a much higher investment cost to get those returns.

Regardless of which program you feel best suits your needs; you don’t want to pass up these opportunities because they won’t be around for long.