Home renovators who purchase an energy-efficient refrigerator, washer, dryer, or other qualifying home appliance may be eligible to receive a $50 to $200 rebate from the federal government. The money is available through the American Recovery and Reinvestment Act — also known as the stimulus package. But the bigger reward offers homeowners a tax credit that can add up to thousands of dollars for qualifying home improvements that increase energy-efficiency.
Energy-efficient products are “not just dollars and cents — they also makes sense for the environment,” says Maria Vargas, spokesperson for the Energy Star program, a collaboration between the Environmental Protection Agency and the Department of Energy, which evaluates the efficiency of home products and awards Energy Star ratings to those that qualify. “The average house is responsible for twice the greenhouse gas emissions as a car,” she says.
As part of the stimulus plan’s numerous programs, $5 billion dollars is available through the Department of Energy’s Weatherization Assistance Program (WAP). The WAP allows income-eligible homeowners to receive up to $6,500 for sealing up a house from energy leaks. (Income thresholds were raised under the new legislation to $44,100 for a family of four, or $29,140 for a family of two.)[1] Additionally, upgrading your weather-stripping, insulation, and windows may save enough energy that the improvements pay for themselves within five years, says Vargas.
Receive a $1,500 Tax Credit
Even if you don’t qualify for a government subsidy on weatherization, you may still receive as much as $1,500 in tax credits per homeowner for various improvement projects. To qualify for the credit, upgrades must be made to an existing home, which serves as the homeowners’ principal residence.
Here’s a summary of the main home renovations in the stimulus plan that are eligible for the credit if items are purchased and “placed into service” in 2009 or 2010. Keep in mind that the $1,500 tax credit is for all home improvements combined, and labor costs are not counted toward the total.
Insulation: Along with sealing up leaks, experts generally recommend that insulation be the first upgrade a homeowner considers. This is especially true if you live in a house that is 40 years or older, because insulation deteriorates over time. Insulation requirements must meet 2009 standards set by the International Energy Conservation Code.[2] The insulation must have a five-year life span or two-year warranty, and insulated siding does not qualify.
Roofing: The government will give you back 30% of what you spend, provided the roofing material has a two-year warranty or is expected to last five years. Any metal or asphalt roofing product with an Energy Star rating qualifies for the tax credit.
Photo courtesy of Milgard Windows & Doors
Windows and Doors: The tax credit will pay 30% of costs for qualified window upgrades. Keep in mind, however, that only the most efficient windows, doors, and skylights on the market qualify for the credit. The requirements are stringent: Windows and doors purchased after June 1, 2009 must have both a “U-factor” and a “Solar Heat Gain Coefficient” (SHGC) below .30. The U-factor measures the rate at which heat leaks from a window; the SHGC measures how well the window blocks heat caused by sunlight. The standard product lines of most manufacturers, even many with an Energy Star rating, don’t meet these requirements.[3]
HVAC: The tax credit can be applied toward eligible heating, ventilation, and central air-conditioning units. This includes biomass stoves, air source heat pumps, furnaces, boilers, water heaters, and advanced main air-circulating fans. The purpose of the credit is to encourage consumers to purchase units with greater energy efficiency when they replace a product. Keep in mind, however, that not all Energy Star products qualify for the credit.[4]
Tankless Water Heaters: You may claim a tax credit for 30% of the full purchase price, including installation, for residential tankless water heaters that have an energy factor of 0.82 (or greater), or a thermal efficiency of at least 90%.
In general, most qualifying products have a Manufacturer Certification Statement. Be sure to save your receipts and this statement for your tax records. Improvements made in 2009 should be claimed on your 2009 taxes using IRS Tax Form 5695. “For these big ticket items, federal tax credits are important,” says Vargas. “But don’t miss the forest for the trees. There are many opportunities to save energy in the home that make sense for which you don’t need a tax credit.”
Tax Credits with no Upper Limit
If you want to take your home improvement to another level, consider renewable energy. These advanced technologies can be expensive, however, and don’t pay for themselves very quickly. To create incentives for interested homeowners, the federal government is sweetening the deal. The tax credit will cover 30% of the cost for eligible products, including installation — with no upper limit.
The systems must be placed into service before December 16, 2016, and can be claimed for new or existing homes. In addition, second homes qualify for the credit for eligible systems, which include:
Geo-thermal heat pumps: All Energy Star geo-thermal heat pumps qualify. “Energy Star products tell consumers, ‘When you are in the market, buy a product worth buying,’” says Vargas. “A more energy-efficient product pays for itself in energy-bill savings over time.”
Solar water heaters: To qualify, the system must be certified by the Solar Rating and Certification Corporation (SRCC) and at least half of the energy generated must come from the sun. The water must be used in the dwelling (swimming pool or hot tub expenses don’t count). In addition, homeowners may only claim spending on the solar water-heating system, not the household’s entire water-heating system.
Solar panels: Photovoltaic systems must provide electricity for the residence, and meet applicable fire and electrical code requirement. Tax credits vary by state: for Oregon the tax credit is $3 per watt, up to $6,000 with a minimum system of 200 watts.
Small wind turbines: Wind power must be used for residential purposes and have a nameplate capacity of no more than 100 kilowatts.
Fuel Cells: For residential fuel cell and micro-turbine systems with an efficiency of at least 30%, and a capacity of at least 0.5kW, the government will credit 30% of the cost — up to $500 per .5kW of power.
To learn more about the renewable energy tax-credits available for home upgrades in Oregon, visit www.oregon.gov/ENERGY/RENEW/. To learn more about the federal program, view the chart on www.energystar.gov, detailing what home improvements and products may qualify for the tax credit.
[1] For additional questions about the Weather Assistance Program, call the program hotline at 800-363-3732. [2] www.iccsafe.org. [3] The National Fenestration Rating Council, which labels windows and doors for efficiency, has compiled a list of qualifying windows available at www.nfrc.org/windowshop/index.aspx. [4] View the Energy Star criteria at www.energystar.gov.
J. Hanson-O’Connell is a freelance writer and editor living in Portland, OR.
