I know, I know, times are tough. Yet, by investing now in one of the many government-sponsored, energy-efficient household improvements, you can reap big savings in the form of tax credits.
Exactly how much depends on the appliance you are replacing but the entire tax benefit is capped at $1,500 per person. Yet, if you did your purchases in 2009, you can receive another $1,500 in 2010. Almost any energy efficient improvements qualify from water heaters, to weather-proofing windows to heating and cooling equipment. You can see a full summary of energy-efficient tax credits available to you at www.EnergyStar.gov.
You can thank the American Recovery and Reinvestment Act of 2009 which extended many of the consumer tax incentives that have been around since 2005. Businesses, utilities and governments as well as consumers are eligible for these tax credits.
Remember too that a tax credit is more valuable than a tax deduction because a tax credit reduces you taxes dollar for dollar while a deduction only removes a percentage of the tax owed. You can itemize these deductions on your Federal tax return and will lower the amount of taxes you owe.
Homeowners who buy high efficiency appliances such as replacing your furnace, roof, doors or windows can receive a tax credit of 30% of the entire cost, including installation and labor. I understand that even a biomass stove that burns a plant derived substance for heating purposes (like wood or pellets) also qualifies.
Consumers can also receive a 30% tax credit for various energy systems placed in service before December 31, 2016 with no dollar limit. Solar energy systems (including solar water heating and/or electrical systems), small wind systems, geothermal heat pumps and residential fuel cell and micro turbine systems .That means you have another seven years or so to save up the 70% of the cost to convert your house to one of these systems.
In addition to the Federal credits, many states and even local governments are offering incentives to make your home more energy-efficient or install renewable energy. There is a website that provides a map of all the available rebates and tax incentives for each state. The database is called the State Incentives for Renewables and Efficiency and can be found at www.desireusa.org. and includes rebates from cities, states and utilities.
The latest Federal incentive, a version of the successful ‘cash for clunkers’ program is focused on replacing inefficient household appliances for ENERGY STAR- rated replacements Since appliances and home electronics combine to consume 40% of your home’s energy use, these energy-efficient products provided savings last year that, according to the Department of Energy, saved enough energy to power 10 million homes, saving consumers $6 billion. More than half the nation’s appliances are now rated ENERGY STAR.
This new $300 million program will be administered by the states and provide a rebate that will range from $50-$200 per consumer. Local authorities will hopefully combine their existing state and utility rebates with this new incentive (called piggybacking) thus providing a bigger bang for the consumer’s buck. The deadline for the all 50 states to submit a proposal to the Department of Energy is October 15. The government is planning to launch the plan nationwide by November 30, just in time for the holidays.