Understanding the Energy-Efficiency Tax Credits
By Bill Primavera
The Home Guru
As published in The Examiner, June 20009
Sometimes I see concise explanations of real estate matters in a publication called Realty Times that supports realtors in creating newsletters and emails for their clients. In this month’s issue is a good article which explains clearly the benefits of the new energy-efficiency tax credit, and I wanted to pass on the information.
(In real estate parlance, realtors don’t always have to be the original source of information, but they can offer themselves as “the source of the source.”)
Now, homeowners can remodel their main residence to reduce energy consumption and claim up to $1,500 in expanded energy-efficiency tax. Available until the end of 2010, the revised Existing Home Retrofit (25C) Tax Credit saves consumers money in two ways: on their costs and on the future utility bills.
My daughter and son-in-law who just purchased a home last year, were already up on the new credit and ready to move on it, even before I was fully aware of its parameters. They arranged for a home energy audit to find the best ways of saving energy in their home, a 19th century farmhouse. “The audit confirmed our suspicion that there was no insulation in our walls,” said my daughter, after having shivered through her first winter in the house, however charming a storybook home it may be. They plan to correct that problem before the end of the summer and claim their tax credit in 2010.
The expanded federal tax credit refunds 30 percent of the product replacement cost up to a total of $1,500. Not only can it be used for HVAC systems, insulation and water heaters but also for windows and doors and insulation, so long as the new products meet IRS qualifications. In some cases, installation costs may also be used to claim the tax credit.
My daughter paid $500 for her home energy audit, which is probably close to standard, and remodelers would say that the expense quickly pays for itself – and more--with savings from the efficiency upgrades. Further, homeowners may be able to combine federal tax credits with local and regional incentives to maximize savings.
In my daughter’s case, insulation is absolutely necessary, but other homeowners will find that upgrading insulation is probably one of the easiest and most affordable ways to save on energy costs. Inspecting the ductwork, caulking and heating and cooling systems for possible upgrades or enhancements also help to provide additional energy savings.
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. Savings depend on local energy prices, but home owners may also save with less frequent replacements. When the credit is included, homeowners can save $100 per year on their water heating expenses.
These are just some examples of how the energy-efficiency tax credit helps consumers save money in making home improvements and cutting down utility bills, but it’s really best to contact a professional remodeler for advice on installing tax credit-qualified improvements in the home.
Homeowners also can use an energy-savings simulation from the NAHB Research Center at http://energysim.toolbase.org to determine likely costs of upgrades and savings.
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 and 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.
In my home, a historic structure, I’ve already installed a more efficient heating system and insulation was upgraded about 20 years ago. My windows are the next target for energy efficiency. Currently they utilize storm windows for insulation and, actually, they do the job very well. But it’s a pain to install them in the fall and take them down in the spring. So, energy tax credit, just hold on until I get to you.
Bill Primavera is a Westchester, NY-based realtor ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) and marketing practitioner ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) who can be reached for questions or comment directly at 914-522-2076.
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