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Get money back for energy-efficient upgrades

Don’t leave tax credits, rebates, or other incentives on the table

Published: March 24, 2015 04:00 PM

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Typically, energy-efficient home improvements involve spending money now so you can save on your energy bills later. And for some upgrades such as solar panels, the payback time can be years. But there are ways to recoup money sooner through federal tax credits, rebates from your state, local government, and utility among other incentives. Here are the details.

Tax credits

As Consumer Reports wrote earlier, federal tax credits for a number of energy upgrades were extended through the end of 2014 so if you replaced your windows, added insulation, or made other improvements you can claim a tax credit and it will be subtracted from the amount you owe Uncle Sam. You can find the full details on the Energy Star website, but in brief, here’s what’s eligible. Keep in mind that if you claimed a tax credit in the earlier years of this program that you may have already hit your $500 limit. You'll need to file IRS form 5695 with your 2014 taxes.

Windows, doors and skylights
What: Replacement or new windows, doors or skylights that meet Energy Star standards.
Tax credit: 10 percent of the cost, up to $500, but windows are capped at $200. Does not include installation.

Roofs (metal and asphalt)
What: Metal roofs with pigmented coatings and asphalt roofs with cooling granules that meet Energy Star requirements..
Tax credit: 10 percent of the cost, not including installation, up to $500.

Non-solar water heaters
What: Gas, oil, or propane water heaters with an Energy Factor (overall efficiency) of 0.82 or more or a thermal efficiency of at least 90 percent. Electric heat pump water heaters with an energy factor of 2.0.
Tax credit: $300

Insulation
What: Bulk insulation products such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place. Products that seal air leaks also qualify, as long as they come with a Manufacturer’s Certification Statement, including weather stripping, spray foam in a can, caulk and house wrap.
Tax credit: 10 percent of the cost, up to $500. Does not include installation but you can install the insulation/home sealing yourself and get the credit.

Biomass stoves
What: Biomass fuel includes agricultural crops and trees, wood and wood waste, and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers. Stoves must have a thermal efficiency rating of at least 75 percent.
Tax credit: $300

Heating, ventilation, and air conditioning
What: The following heating, ventilation and air conditioning equipment.

  • Central air conditioning, $300 tax credit.
  • Advanced main air circulating fan, $50 tax credit.
  •  Air source heat pumps, $300 tax credit.
  • Gas, propane or oil hot water boiler, $150 tax credit, including installation.
  •  Natural gas, propane or oil furnace, $150 tax credit.

Rebates

Rebates are a little trickier to find but you’ll probably get the cash back quicker and they are available for a wider range of products and upgrades. According to the Department of Energy, at the moment there are no federal rebates for energy improvements but some state and local governments reward you for making energy-saving upgrades. You can also check the website of your utility provider as well as that of the manufacturer of the product you’re buying.

Rebates are not dependent on tax credits so with a little luck you can collect both. Rebates are available for many large appliances including washers, dryers, and refrigerators; building products including windows, doors, roofing, and insulation; heating and cooling equipment including furnaces, and room and central air conditioners; electronics including televisions and computers; lighting and fans; and water heaters, among many other products.

Rebate finders: You can search for rebates on the DOE’s website, energy.gov, and the Energy Star website.

Incentives

Your utility may also offer incentives that can benefit you. For example, they may pay you to recycle your old refrigerator or freezer or offer you a free or discounted energy audit to help you identify the energy upgrades that will save you the most.

Incentive finders: To find incentives, check your utility's website as well as the Database of State Incentives for Renewables and Efficiency to see what’s available in your area.

Tax credits available through 2016

Several federal tax credits for energy upgrades will be available until the end of 2016. The projects tend to cost more but you can recoup 30 percent of the cost with no upper limit and credits include installation costs. Plus, unlike many of the other tax credits, they’re available for your primary residence as well as a second home. The upgrades include:

Geothermal heat pumps
Geothermal heat pumps use the ground instead of outside air to provide heating, air conditioning and, in many cases, hot water.  Must meet Energy Star requirements.

Small wind turbines
A wind turbine converts energy from the wind into electricity that’s compatible with your home’s electrical system. To qualify, the turbine must have a maximum output rating of no more than 100 kilowatts.

Solar energy systems
Both solar water heaters and solar panels are eligible for tax credits. For solar water heaters, the water must be used in the dwelling and at least half of the energy generated should come from the sun. The heater must be certified by the Solar Rating and Certification Corporation or a similar entity. Qualifying photovoltaic systems must provide electricity for the residence and meet applicable fire and electrical code requirements. Check the Energy Star website for more details.

—Mary H.J. Farrell (@mhjfarrell on Twitter)


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