Energy efficient tax credits (and savings) still existby Tim Manni
The good news is that certain tax advantages remain in place for energy-efficient home improvements. The bad news is that the tax breaks are smaller and there are some catches that may prevent you from qualifying at all.
While the bulk of the energy-efficient credits expired at the end of 2010, a bill passed back in December allowed for certain tax breaks to remain in effect:
The tax law passed in December extends a federal tax credit through 2011 for people who make their homes more energy efficient. The catch: The government reduced the credit to pre-2009 levels. This means that taxpayers will be able to get a maximum $500 lifetime credit for up to 10% of costs of making their home more efficient. That’s down drastically from the maximum $1,500 credit that covered up to 30% of expenses which taxpayers could claim in tax years 2009 and 2010. (Now and then, you’d have to spend at least $5,000 to get the maximum credit.)
The new rules also limit how much of the federal tax credit can be awarded for various types of equipment. Windows get the most stringent rules. If you spend up to $2,000 this year to install new windows you can get a maximum $200 credit—but after getting that credit, you can’t claim any tax credits for windows in future years, not even if you get even more efficient windows later or move to a new home and install such windows there.
The caps on other types of equipments reset annually. So you can get a $150 credit for a furnace or hot water boiler in 2011, and again in 2012 if you upgrade. The credit is capped at $50 a year for smaller equipment like an advanced main circulating fan (they make furnaces more efficient), but can be as high as $300 for most other types of qualified property.
Are energy-efficient home improvements still worth it?
Even without a tax credit, certain energy-efficient improvements can save you significantly over the long haul, providing you with a real return on your investment.
-To see which improvements still qualify for a federal tax credit, be sure to visit EnergyStar.gov to find out-
“There are numerous projects you can undertake right now that will make your home more comfortable,” wrote HSH.com contributing writer Shannon Dauphin. “Those start paying for themselves immediately, as they shave dollars off your utility bills.”
Here’s where you should begin
You can start by adding or installing new insulation and sealing up those drafty portions of your home. These types of cost-friendly improvements tend to pay for themselves almost immediately. “But even if it didn’t, said green home expert Matt Grocoff, it makes your home much more comfortable, and that makes it worthwhile.”
Dauphin writes, “The lighting in your home also contributes to the comfort factor. ‘Anyone who still has incandescent light bulbs should just take a 20-dollar bill and set it on fire right now,’ Grocoff says. As the industry phases out incandescent light bulbs over the next few years, he recommends homeowners switch to lighting that is not only energy-efficient but that has the right ‘coloring’ for your room. The right light bulb can both flatter a room and save you 70 to 90 percent on lighting costs.”
Want to learn more about how you can save with energy-efficient home improvements, even without a tax credit? Be sure to read our article “Save green on energy-efficient home improvements, even without a tax credit.”