In 2009 and 2010, taxpayers could qualify for up to $1,500 for making home updates. The Energy Tax Credits for 2011, however, are being significantly reduced. Most homeowners can still qualify for up to $500 in energy tax credits, which can reduce the sting of home update costs.
Basics of Energy Tax Credits
The Energy Tax Credits system has existed in one form or another for several years. During 2009 and 2010, the American Recovery and Reinvestment Act increased the maximum tax credit from $500 to $1,500. That increase expired on Dec. 31, and the new credits are capped at $500 for energy-efficient home upgrades. So which home improvements are worth claiming the $500?
Cooling your air
Air conditioners are practically required in some areas of the country, but replacing them can save you money. Image: Flickr / alohateam / CC-BY-SA
Total Available Credit: $300
Average Estimated Cost: $10,000 for a complete system and installation, depending on home size.
Adding a high-efficiency central air conditioning system to your home can improve the value of the home. Paired with a programmable thermostat, central AC can also save you between $10 and $2,000 a year in energy costs, depending on how often you use the AC.
Heating your home
Replacing space heaters with central heating systems can save you money -- if paired with a programmable thermostat. Image: Flickr / collinanderson / CC-BY
Total Available Credit: Electric heat pumps qualify for $300. Furnaces and boilers qualify for $150. Main circulating fans qualify for $50.
Average Estimated Cost: Between $150 and $10,000.
High-efficiency heating systems, depending on the weather where you live, can save you up to $4,000 a year in energy costs. In colder areas of the country, some form of central heating system is nearly required to re-sell your home. Government tax credits on these systems are based on the efficiency rating and cost of the system installed. Natural gas and propane furnaces offer the highest value-to-efficiency ratio.
Biomass stoves
Pellet and biomass stoves burn renewable resources for heat but can pollute the air. Image: Flickr / s0gallchoir / CC-BY
Total Available Credit: $300 through 2011
Average Estimated Cost: $2,000 to $5,000
Biomass stoves burn wood pellets, wood, plants, fibers — just about anything natural, renewable and flammable — for heat. while the government credit is predicated on an efficiency rating for 75 percent or more, you should also research the carbon emissions of various types of fuels to keep the air quality around your home good.
Insulation
Home insulation can magnify the effects of other energy-efficiency changes. Image: Flickr / zieak / CC-BY
Total Available Credit: $500 through 2011
Average Estimated Cost: $500 to $5,000
Blown in, rolled out or added to existing systems, insulation can improve the efficiency of all other heating and air conditioning improvements you make to your home. Adding insulation can also be one of the lowest-cost, highest-return improvements you can make to your home energy costs.
Top it off
Changing the roofing on your home to heat-reflecting materials can improve the energy efficiency. Image: Flickr / iwona_kellie / CC-BY
Total Available Credit: $500 through 2011
Average Estimated Cost: $2,500 to $6,000
Changing the roofing on your home can help reduce heating and air conditioning costs by reflecting solar energy rather than soaking it in. The tax credit can only be applied to materials, not installation.
Heat your water
Heating your water can be energy-intensive. Keeping it hot, however, is even more so. Image: Flickr / waikikiweekly / CC-BY-ND
Total Available Credit: $300 through 2011
Average Estimated Cost: $600 to $6,000
Most tank water heaters will not qualify for this tax credit, but gas, oil and propane-fueled, tankless water heaters will qualify.
Add some light
Energy-efficient windows have a higher insulation value than traditional windows. Image: Flickr / jasonpratt / CC-BY
Total Available Credit: $500 for doors or skylights, $200 for windows
Average Estimated Cost: $500 to $5,000
Replacing windows, doors and skylights with Energy Star rated glass can save you significantly in energy costs. The credit can only be applied toward equipment, not installation or labor.
Other tax credits
The tax credits for energy efficiency extend beyond these basic options. There are also state tax credits available for appliances and installing wind and solar energy collectors on your home come with both local and state tax credits and rebates. Check out Energy Savers for a full list of available rebates.
Sources
All Around The House
Energy Savers
Cost Helper
