KEY TO EARNING ENERGY-EFFICIENCY TAX CREDITS

Homeowners now can claim up to $1,500 in expanded energy-efficiency tax credits for remodeling their principal residence to reduce energy consumption. Available until the end of 2010, the revamped Existing Home Retrofit (25C) Tax Credit helps consumers save two ways: on their costs and on their utility bill

WHAT QUALIFIES?

See: Federal Tax Credits for Energy Efficiency as outlined by Energy Star. Click HERE

Also see: National Association of Home Builders for the Facts on Energy Efficiency Tax Credit 

The expanded federal tax credit refunds 30 percent of the product replacement cost up to a total of $1,500.

In some cases, installation costs may also be used to claim the tax credit. As long as the new products meet IRS qualifications.can be used for:

• HVAC systems
• insulation
• water heaters
• windows and doors
• insulation Home energy audits can cost as little as $500, which remodelers say is an expense that pays for itself - and more - with savings from efficiency upgrades. And homeowners may be able to combine federal tax credits with local and regional incentives to maximize savings.

Here's one example: Insulation improvements may be one of the easiest and most affordable ways to save on energy costs. Upgrading inefficient insulation (from R-19 to R-38) in the attic of a two-story, 2,000-square-foot Chicago home might cost around $1,000, but the tax credit brings that down to $700. Add that to Chicago's MidAmerican Energy residential energy efficiency rebate program, which can return up to $600 spent on insulation or other energy-efficiency upgrades, and the cost drops to $100 - meaning a two-year payback period for the $51 estimated annual utility savings for this project.

Inspecting the ductwork, caulking and heating and cooling systems for possible upgrades or enhancements also help to provide additional energy savings.

Homeowners also can use the tax credit for heating and cooling components.

For example, upgrading a standard 10-year-old air conditioner to today's federal minimum 13-SEER (Seasonal Energy Efficiency Ratio) model may cost about $5,500 in Phoenix, but does not qualify for the tax credit. Spending as little as $2,000 more for a higher-efficiency air-conditioner (such as 16-SEER) earns the homeowner the $1,500 energy-efficiency federal tax credit. Plus, the local power company provides a rebate starting at $425. With the tax credit and utility rebate, the cost difference can be paid back in a couple of years, while the homeowner may enjoy utility bills savings for years to come.

With the credit, tankless water heaters are comparable in cost to traditional gas water heaters, but last as long as 20 years and are 30 percent more efficient. When the credit is included, homeowners can save $100 per year on their water heating expenses, he added.

In addition to expanding the 25C tax credit, the Wind, Solar, Geothermal and Fuel Cell (25D) Tax Credit for renewable energy products now provides larger incentives for installing

• geothermal heat pumps
• solar panels
• solar water heaters
• small wind energy systems
• fuel cells.

Although the upfront costs are high for these products, the tax credit is 30 percent and there is no cap on their cost through 2016.

Taxpayers can claim the credits on IRS Form 5695.

OTHER LINKS TO USEFUL SITES

• Homeowners can use an energy-savings simulation from the NAHB Research Center at http://energysim.toolbase.org/ to determine likely costs of upgrades and savings.
• Information on rebates from utility companies and other state and local government incentives is available at Database of state incentives for renewables and efficiency at http://www.dsireusa.org./
• Alliance to Save Energy at http://ase.org/content/article/detail/2654
• Home Channel News at http://www.homechannelnews.com/story.aspx?id=104655&menuid=305
• HGTVPro.com http://www.hgtvpro.com/hpro/nws_ind_nws_trends/article/0,,HPRO_26519_5943221,00.html

Good luck!

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