Personal Finance: Energy-efficiency tax credits expire soon
If you haven’t already jumped on the home energy-efficiency bandwagon, the good news is that several federal energy tax credits originally slated to end in 2010 were extended through Dec. 31, 2011; but the not-so-good news is that these credits are worth significantly less and are more restrictive than before.
All is not lost, however, since several additional credits (outlined below) remain in effect through 2016.
Here’s how the soon-to-expire energy tax credits work:
You may claim a credit for 10 percent of the total cost of various home energy-efficiency products for your existing primary residence, including: insulation; heating, ventilation and air conditioning systems; metal and asphalt roofs; energy-efficient windows, doors and skylights; biomass stoves and non-solar water heaters.
There are a few restrictions, however:
* The maximum combined credit is $500 (10 percent of $5,000 in total cost) for all allowable products purchased between 2006 and 2011. Thus, if you’ve already claimed credits over $500 in previous years when limits were higher, you cannot file.
* Certain items have lower allowable tax credit maximums.
For example: windows are capped at $200 in total credits; furnaces and boilers – $150 maximum (must have an annual fuel utilization rate of 95 or greater); central air conditioner – $300 maximum; water heater – $300 (within certain efficiency limits); and biomass stoves – $300.
* You cannot claim a credit for labor costs.
* Energy tax credits are nonrefundable, which means you can only claim a credit to offset taxes you owe for the year.
* Tax credits may only be claimed once and are limited to the year in which you purchased the item.
Energy tax credits will continue to be available for geothermal heat pumps, solar energy systems and wind energy systems installed at new or existing principal or second homes by Dec. 31, 2016, for 30 percent of cost, with no upper limit.
In addition, a credit continues for fuel cells at 30 percent of cost up to $500 per kW of power capacity (for primary residences only).
And tax credits are still available on certain fuel-efficient vehicles.
Visit www.fueleconomy.gov/feg/taxcenter.shtml for details. For full details on available tax credits, visit www.energystar.gov.
If you’re a low-income household and can’t afford to weatherproof your home, you may be eligible for the Department of Energy’s Weatherization Assistance Program (WAP).
If you’re accepted, a professional weatherization crew will conduct a home energy audit where they’ll analyze your utility bills, test for infiltration of outside air, inspect your home and equipment for safety and determine the most cost-effective energy conservation measures for your home.
Depending on what they find, the agency will then conduct needed repairs and equipment installation, which might include: installing wall, floor and attic insulation; sealing and repairing ducts; reducing air infiltration and pressure imbalances; and tuning, repairing or replacing heating and cooling systems, as needed.
To learn how WAP works, visit www.eere.energy.gov/wip/wap.html.
Also, you may qualify for short-term utility bill assistance through the Low-Income Energy Assistance Program (www.acf.hhs.gov/programs/ocs/liheap).
Other great ways to cut energy costs include turning your thermostat back 10°–15° for eight hours, while asleep or at work, using Energy Star appliances and compact fluorescent lights and lowering your hot water heater temperature to 120° F or lower.
Bottom line: Take advantage of financial incentives available to make your home more energy efficient – just in time for winter’s chill.
Jason Alderman directs Visa’s financial education programs.
To follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney.