Green Payoff

The massive economic stimulus package provides hefty financial incentives for going green in 2009 and 2010. So, in addition to saving on water and energy bills and reducing your carbon footprint, you’ll be able to use tax credits to make such upgrades more affordable.?

?“The new tax credit also aligns with industry research indicating that even the most aggressive efficiency goals for new homes won’t make a dent in overall energy consumption,” says National Association of Home Builders (NAHB) Remodelers Chairman Greg Miedema, a remodeler from Tucson, Arizona. “Instead, remodeling and retrofitting the nation’s older homes is by far the more efficient solution.”

A 2008 California study revealed that 70 percent of the green-house gas emissions related to energy consumption by single-family homes can be attributed to homes built before 1983.

The study, conducted by the California Homebuilding Foundation, found that spending $10,000 retrofitting a 1960s home would save 8.5 tons of carbon. Increasing the energy efficiency of a new home by 35 percent would cost about $5,000 and reduce emissions by only 1.1 tons.

The bottom line: Retrofitting existing homes with energy-efficient features is four to eight times more carbon- and cost-efficient than adding further energy-efficiency requirements to new homes, the study showed.

But weren’t there already tax incentives for green remodeling? Yes, but they weren’t as generous as the new incentives.The Internal Revenue Code section 25C tax credit, which had expired at the end of 2007, was reinstated as part of the economic 
rescue package passed by the Bush 
Administration last fall. Under that program, homeowners could be rewarded for installing energy-efficient windows, doors, roofing and insulation as well as furnaces, air conditioners and heat pumps.
?
But remodelers found that the terms of the 25C credit—equal to only 10 percent of the cost of each product and with a lifetime cap of $500—weren’t making an impression or spurring activity.

Now, the credit rate and lifetime cap have been tripled—to 30 percent and $1,500, respectively—the list of eligible improvements expanded and the deadline for applying has been extended through the end of 2010.

For example, geothermal heat pumps, solar panels and solar hot water heaters are now included in the 30 percent tax credit. These credits apply to new construction as well.

Congressional estimates indicate that the new rules for the tax incentive will increase aggregate remodeling activity by more than $6 billion.

Details on qualifying improvements will soon be available at the IRS Web site, www.irs.gov. It’s expected that homeowners will need to complete Form 5695 (Residential Energy Credits) and submit it as part of their 2009 income tax returns to claim the credit.

“The tax credit makes it easier for clients to spend a little more to upgrade to better, more energy-efficient products,” says Jeff Brecko, vice president of Aurora Custom

Remodeling and a Certified Green Professional (CGP). “We’ve found that Low-E windows are energy efficient and so competitively priced that we now offer them as our standard.”

Brecko adds that many home-owners are also moving toward spray foam insulation and higher SEER-rated HVAC systems.

So, is the federal program really helping business? Yes, says 
Brecko. “Most of our clients are taking advantage of the tax credit to upgrade items in need of replace-
ment,” he says.

“But in some cases, it’s encouraged homeowners to explore products such as solar water heaters even when there isn’t a compelling need to replace the existing products.”

Toby Williams, Director of Energy Matters at American Electrical Contracting, agrees.

“Investing in newer, more efficient and smarter technologies will pay for itself in 12 to 48 months in many cases,” he says “The tax credits and rebates make the process a little easier in many instances. This is a time for inno-vation and adaptation.”

Williams, however, says the tax credit is only one of many reasons his customers are remodeling with sustainability in mind: “There’s also the good feeling that comes from knowing that your home or business, in its small 
way, is making the planet a little bit better.”

What’s Covered by the Tax Credit
In 2009 and 2010, tax credits of 30 percent of the cost—up to $1,500—are available for the following energy-efficient improvements to existing homes only:
> Windows and doors.
> Insulation.
> Roofs (metal and asphalt).
> Heating, ventilating and air-conditioning.
> Water heaters (non solar).
> Biomass stoves.

Through 2016, tax credits are available of 30 percent of the cost—with no upper limit—for the following energy-efficient? improvements to new homes and existing homes:
> Geothermal heat pumps.
> Solar panels.
> Solar water heaters.
> Small wind energy systems.
> Fuel cells.
Find out more on the Web at www.energystar.gov/taxcredits.