Promote window renovation or deduct it from your taxes?
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Subsidy or tax credit – the difference at a glance
Are you trying to decide whether to get a subsidy for your window modernization or to claim the costs as a tax deduction? This is where subsidies and tax credits differ significantly – both in terms of the financial effect and the effort and timing of the relief.
The most important differences in a direct comparison:
Type of relief: Subsidies reduce investment costs directly through grants or repayment subsidies, while tax credits reduce your income tax.
Timing of the effect: Subsidies take effect shortly after completion of the measure or immediately within the financing, while tax credits are spread over three years.
Dependence on tax burden: Subsidies are independent of your income, while the tax bonus only offers advantages if your tax burden is sufficient.
Planning and application effort: Subsidies require an application to be submitted before the measure begins and technical evidence to be provided, while the tax bonus can be used without a prior application via your tax return.
Role of the energy consultant: Usually mandatory for BAFA and KfW subsidies, but not essential for the tax bonus.
Suitable for: Subsidies are suitable for planned renovations with a higher investment volume, while the tax bonus is suitable for flexible implementation and a focus on tax optimization.
When is a subsidy for new windows the better choice?
A government subsidy is particularly useful if you plan your window modernization early on and make clear investment decisions. Especially in the case of higher costs and structured renovation projects, you benefit from predictable subsidies or favorable financing conditions—regardless of your tax burden.
Typical situations in which window subsidies make sense:
Window replacement is part of a planned energy-efficient renovation.
The investment sum is higher and needs to be reduced immediately.
An energy consultant is involved anyway.
The measure can be applied for and prepared in advance.
Immediate financial relief is important.
BEG federal funding via BAFA or KfW
Federal funding for efficient buildings (BEG) is the central funding framework for window modernization. It is aimed at owners who are carrying out energy-efficient renovations and complying with binding efficiency standards. Both options reduce renovation costs in a predictable manner and provide financial security at an early stage.
BAFA funding for individual measures
BAFA funding is particularly suitable for the targeted replacement of individual windows in existing buildings:
Direct subsidy for eligible costs
Basic funding rate approx. 15%, with iSFP bonus up to approx. 20%
Application must be submitted before the start of the measures
Involvement of an energy efficiency expert required
Financial relief takes effect immediately after completion of the measure
KfW funding as part of an energy-efficient house
KfW funding is the right choice if window replacement is part of a comprehensive energy-efficient renovation:
Low-interest modernization loan with possible repayment subsidy
Windows only eligible for funding as part of an energy-efficient house standard
Particularly useful for high investment and financing requirements
Long-term planning and support from an energy consultant is necessary
Regional subsidy programs from states and municipalities
In addition to nationwide programs, many regions offer additional subsidies from states or municipalities that can provide additional support for window modernization. As these programs vary greatly, it is worth checking them individually before starting the project in order to secure available funds at an early stage.
Typical features of regional window subsidy programs:
Additional grants or low-interest loans
Often limited subsidy budgets and fixed application periods
Own technical and formal requirements
Can sometimes be combined with federal subsidies
When is the tax bonus worthwhile for window modernization?
The tax bonus is particularly suitable if you want to implement your window modernization flexibly and keep the effort to a minimum. It is not necessary to submit an application before starting, which makes it attractive for short-term measures. The financial relief is spread over several years, but the process is comparatively simple and predictable.
Typical situations in which the tax bonus is worthwhile:
The windows are replaced without lengthy advance planning.
The project has already been completed or is about to be completed.
No subsidy applications have been submitted.
The property is used by the owner.
Sufficient income tax is payable.
The renovation costs are to be optimized for tax purposes.
Tax reduction in accordance with Section 35c of the German Income Tax Act (EStG)
With the tax reduction in accordance with Section 35c EStG, you can claim up to 20% of the costs of window modernization for tax purposes. The relief is spread over three years and is particularly suitable if you want to optimize your renovation costs for tax purposes retrospectively.
Important key points at a glance:
Tax bonus of up to 20% of the renovation costs
Tax reduction spread over three years
No obligation to apply before the start of the measure
The property must be owner-occupied
Invoice from a specialist contractor and official certificate required
Actual benefit depends on individual tax burden
Craftsman bonus for window work
In addition to the tax bonus under Section 35c of the German Income Tax Act (EStG), there is also the craftsman bonus under Section 35a EStG. This applies to accompanying work related to window replacement, such as repairs or additional craftsmanship services. However, it does not replace the tax bonus for energy-efficient window modernization.
Important to know:
The craftsman bonus is limited in amount.
It only applies to labor costs, not materials.
It cannot be combined with Section 35c EStG for the same measure.
For the actual window replacement, Section 35c EStG is usually the more economically sensible option.
Sample calculation: Direct comparison of subsidies vs. tax credits
Whether a subsidy or a tax credit is more worthwhile depends largely on your initial situation. The following typical scenarios show how different the financial impact of both options can be when modernizing windows.
Scenario 1 – Rapid financial relief through subsidies
This scenario is typical if you are planning to modernize your windows and want to reduce your investment costs immediately.
Initial situation:
Owner-occupied single-family home
Window replacement as a single measure
Clear planning before the start of the measures
Energy efficiency expert required (mandatory under subsidy law)
Sample calculation:
Investment costs: $24,000
BAFA subsidy (15%): $3,000 grant
Result: The costs are immediately reduced to $17,000. The relief takes effect immediately after completion of the measure and directly improves liquidity.
Suitable for: Owners who want to implement a plannable renovation and benefit from lower costs early on.
Scenario 2 – Tax bonus with sufficient tax burden
This scenario is suitable if you are replacing the windows without applying for a subsidy and want to optimize the renovation costs for tax purposes.
Initial situation:
Owner-occupied property
No subsidy applications submitted
No obligation to involve an energy consultant
Sufficient income tax to make full use of the tax bonus
Guideline values for income tax (Section 35c EStG for a €20,000 investment):
Year 1: approx. €1,400 tax savings (7%)
Year 2: approx. €1,400 tax savings (7%)
Year 3: approx. €1,200 tax savings (6%)
The respective income tax must be at least this amount in order to take full advantage of the bonus.
Sample calculation:
Investment costs: €20,000
Tax bonus according to § 35c EStG (20%): €4,000
Distribution over three years
Result: The tax burden is reduced by a total of €4,000 over three years. The relief is delayed, but the total amount is higher. There are no additional costs for an energy consultant.
Suitable for: Owners with a stable income tax who do not want to go through formal subsidy processes and appreciate the low organizational effort involved in the tax bonus.
Scenario 3 – Extensive renovation with financing
This scenario applies to larger renovation projects in which window replacement is part of a comprehensive energy concept.
Initial situation:
Combination of several energy efficiency measures
High capital requirements
Long-term planning
Energy efficiency expert absolutely necessary
Sample calculation:
Total investment costs: €60,000
KfW modernization loan with repayment subsidy
Result: Financing is provided on favorable terms, and the repayment subsidy significantly reduces the repayment amount. A tax bonus is excluded for the same measures. The costs for the energy consultant are mandatory but integrated into the subsidy logic.
Suitable for: Owners who are carrying out comprehensive energy-efficient renovations, need structured support, and are looking for financing security through promotional loans.
Requirements for subsidies and tax credits
In order to actually take advantage of subsidies or tax credits for your window modernization, certain formal and technical requirements must be met. If these points are overlooked, the entitlement is often completely forfeited—even if the windows are of high technical quality. Careful preparation and complete documentation are therefore crucial.
Here is an overview of the requirements for subsidies and tax credits:
The windows installed must meet the applicable energy efficiency requirements. The decisive factor is the Uw value of the entire window, which must be below the prescribed limit and clearly stated in the technical product data.
The windows must be replaced by a specialist company. Work carried out by the homeowner is not recognized for subsidy programs or tax credits.
Technical confirmation by an energy efficiency expert is required for subsidies. For tax credits under Section 35c of the German Income Tax Act (EStG), a certificate based on the official template is required.
The invoice must clearly identify the measure and be paid by non-cash means. Cash payments automatically result in the loss of entitlement.
Subsidy applications to BAFA or KfW must be submitted before the measure begins. The tax bonus is claimed on the income tax return after completion of the renovation and is taken into account over a period of three years.
Common mistakes with subsidies and tax credits
When modernizing windows, subsidies or tax credits are often lost not because of the technology, but due to formal errors. Many of these pitfalls can be avoided if you know the procedures and make the right decisions early on.
These mistakes occur particularly frequently – here's how to avoid them:
Subsidy application submitted too late: Subsidy applications to BAFA or KfW must always be submitted before the start of the project.
Solution: Check subsidies early on and submit your application before placing any orders.
Incorrect or ineligible windows selected: If the minimum technical requirements, in particular the Uw value, are not met, the subsidy will not be granted.
Solution: Check the eligibility of the windows before purchasing.
Missing specialist contractor certificate: Without the correct certificate or energy consultant confirmation, neither funding nor tax bonuses will be recognized. Solution: Plan ahead and obtain all necessary documentation in good time.
Cash payment of the craftsman's invoice: Cash payments automatically lead to exclusion.
Solution: Always pay invoices by non-cash means and keep payment receipts.
Inadmissible combination of subsidy and tax bonus: Only one option may be used for the same measure.
Solution: Decide in advance which option makes more economic sense.
Tax bonus planned without sufficient tax burden: The tax bonus only applies if income tax is actually payable.
Solution: Realistically assess the initial tax situation in advance.
Which option suits your situation?
Whether a subsidy or tax credit is the better choice depends less on the measure itself than on your personal circumstances. The decisive factors are your planning horizon, investment amount, and tax situation. The following key questions will help you quickly identify the right option for you.
A subsidy is the right choice for you if:
You are planning to modernize your windows at an early stage
the window replacement is part of an energy-efficient renovation
you want to reduce the investment costs directly
an energy consultant is involved
you want to reduce your tax burden regardless of your tax liability
A tax credit is a better fit for you if:
you have replaced your windows recently or have already done so no subsidy applications have been submitted
Your property is owner-occupied
You pay sufficient income tax
You want to keep the administrative effort to a minimum
A KfW modernization loan makes sense if:
Several energy efficiency measures are being combined
A higher investment volume needs to be financed
There is a long-term plan with clear efficiency targets
FAQ: Answers to your questions about new windows, subsidies, and tax credits
Do you still have questions about window modernization, subsidies, or tax credits? We have the answers for you:
Double subsidies are not permitted for the same window modernization. You must decide whether to take advantage of government subsidies or the tax bonus under Section 35c of the German Income Tax Act (EStG). BAFA grants or KfW loans cannot be combined with the tax bonus for the same windows. The craftsman's bonus under Section 35a EStG is also excluded for the same measure. Only clearly separate renovation measures may be subsidized or used for tax purposes in parallel.
You must always apply for a subsidy from BAFA or KfW before starting the window modernization. The windows must meet minimum technical requirements and confirmation from an energy efficiency expert is usually required. You can claim the tax bonus under Section 35c of the German Income Tax Act (EStG) on your tax return after the renovation has been completed. The requirements are that you own the property and have a certificate from a specialist contractor. Missing evidence or missed deadlines will result in the loss of your entitlement.
With a subsidy, you can usually reduce your investment costs by around 15 to 20%, regardless of your tax burden. The tax bonus under Section 35c of the German Income Tax Act (EStG) allows for a tax reduction of up to 20% of the renovation costs, spread over three years. The extent of this benefit depends on your personal tax burden.
Subsidies and loans from BAFA or KfW programs reduce costs directly or enable favorable financing, but require early planning and application. The tax bonus reduces your income tax retrospectively over several years and does not require an application before the start of the project. In short: subsidies are worthwhile for planned renovations, while the tax bonus is better for flexible implementation.
For new windows, you can either take advantage of a BAFA subsidy for individual measures, a KfW loan as part of a comprehensive renovation, or the tax bonus under Section 35c of the German Income Tax Act (EStG). The BAFA subsidy directly reduces costs, the KfW subsidy supports larger renovation projects with low-interest loans, and the tax bonus reduces your income tax over three years. Which option is right for you depends on your plans, the scope of your investment, and your tax situation.