How Much Can You Save with Green Remodeling Tax Credits?

From Brittany on April 22nd, 2011 in Green Remodeling

Happy Earth Day, folks! In honor of the 41st anniversary of this greenest of holidays, I’d like to share a breakdown on energy-saving home improvements, and the federal tax incentives that make them affordable.

Indeed, remodeling tax info looks complicated on the surface. But fear not! I’m going to help you take advantage of every federal tax break available before they expire. Let’s get started.

Tax Credits for Basic Home Improvements

Some federal incentives have ended for 2010, some have been extended through 2011, and certain credits last all the way to 2016. Many of these projects are also pretty standard for home upkeep. Things like installing new windows, insulation, and a better air conditioning or heating system all qualify for federal tax credits.

For upgrades made in 2010, you can get $1,500 back, or 30% on the first $5,000 spent. For improvements in 2011, the credit decreases to $500, or 10% of the first $5,000 you spend. This requires IRS form 5696 and receipts from your purchases.

State rebates may also be available. Find out what improvements cost in your area by clicking here.

These credits will be available in most cases until 2016, and most apply to both first and second homes.  In the Non-Business Energy Property Credit, the overall credit caps at $500 for approved energy-efficient improvements, but within that blanket cap, certain green remodeling projects have their own caps, such as more efficient windows and doors, better insulation, and roof improvements.

Homeowners can still deduct 10% of the purchase price of materials, but the cap is set at $200 for these types of deductions. Certain appliances, however, such as an upgraded hot water heater or an energy-efficient heating and cooling system, can earn a $300 tax credit.

Solar Panels, Wind Turbines and Geothermal Rebates

The second green tax break for homeowners is a big one. The Residential Energy Efficient Property Credit is a 30% credit off the cost of clean energy systems, including home solar panels, wind turbines, geothermal, and fuel cell systems. There is no cap on this credit, and installation and labor charges are also included in the credit, except for fuel cell upgrades.

To qualify for the credits, homeowners would be wise to get estimates quickly before they expire, and to investigate what rebate programs currently exist in their state.

Important Information on Green Tax Credits

Keep in mind that for any green home improvements, you should do careful research to verify a manufacturer’s tax credit certification statement before purchase and installation of certain appliances or energy technology systems.

When it comes to replacement windows and HVAC, only certain Energy Star products and appliances are approved for qualification. Other eligible home improvements include certain window films, duct sealants, pigmented metal roofs, and asphalt roofs with cooling granules.

New additions to the tax credit plan are biomass stoves and ground-source or geothermal heat pumps. A solid source for more information is the Tax Incentives Assistance Project (TIAP) website, and the Department of Energy offers a helpline, at 1-800-dial-DOE, for consumers with questions about green tax incentives.

Most states have their own incentive programs in place, but with many states experiencing severe budget shortages, much of what was previously available in rebate programs has been reduced or cut completely.

In 2009, the American Recovery and Reinvestment Tax Act was put forth to stimulate energy efficiency practices in the green economy with expansion of existing home energy credits, which directly increase refunds or reduce a total tax bill.

Photos via Flickr