Uncle Sam Can Help

As if there weren’t already enough good reasons to upgrade your home with energy efficient features, the federal government has just added another—expanded tax credits.

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 upgrades more affordable.

“The new tax credits also align 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, Ariz. “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 greenhouse gas emissions related to single-family homes can be attributed to those built before 1983.

The study, conducted by the California Homebuilding Foundation, found that spending $10,000 retrofitting a 1960s-era home would save 8.5 tons of carbon annually. 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 features to new homes.
But aren’t the up-front costs of green remodeling higher? Yes, they can be. But that’s why the tax credits are so important, say energy-efficiency advocates.

“The government seems to recognize that the use of high-performance, green and sustainable building products comes at a slight cost increase to conventional methods,” says Jeff Alexander, president of Greenblock Insulated Concrete Forms.

“The tax credits help to offset the incremental cost increases so the end result is a significantly improved home at relatively the same cost,” Alexander adds.

Still, have the tax credits had much effect on the local remodeling market? Not as much as you might think, say local professionals.

“The word isn’t out,” says Tampa">Tampa Bay remodeler Jon Greaves of Greaves Construction. “People don’t know much about the tax credits, but I’m telling everybody and people are seeing the value and getting excited.”

But in addition to lack of knowledge, lack of funds has been a hinderance as well.

“Some people are just not willing to spend any money of any kind, regardless of the incentives,” says Tampa">Tampa remodeler Cathy Byrd of Innovative Restorations. “Also, the formulas are a bit confusing and it can be hard to understand how they apply.”

But now is a great time to re-model, especially if you’re interested in eco-upgrades, Greaves says. Lower prices on building products, favorable home-loan rates and savings from tax credits combine to ease the financial impact of renovation projects.

Plus, many remodelers don’t have as much work as they did a couple of years ago. So you like-
ly can get your project done more quickly and for less money, Greaves says.

But weren’t there already tax incentives for green remodeling? Yes, but they weren’t as generous as the new ones.

The Internal Revenue Code section 25C tax credit for existing homes, 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, home-owners 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 life-time cap have been tripled—to 30 percent and $1,500, respectively—the list of eligible improvements has been 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—and there’s no cap on their cost through 2016. These credits also apply to new construction.

Congressional estimates in-dicate that new rules for the tax incentives should increase aggregate remodeling activity by more than $6 billion.

Details on qualifying improvements are 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 benefits for energy-efficient products are a great short-term bonus to home owners,” says kitchen designer Jamie Goldberg of Jamie Goldberg Kitchen and Bath Design in Tampa">Tampa.?

“The long-term benefits are substantial, too; lower utility bills and a cleaner environment.”
Homeowners should also look at water-saving dishwashers and washing machines, adds Goldberg, as long as they’re already planning to replace those appliances.

But check the guidelines be-fore choosing products because some —particularly many brands of windows—don’t qualify under the government’s new, more stringent standards. Remodelers can guide homeowners to the best energy-efficient products.

Local power companies also offer incentives for energy-efficient renovations. Progress Energy, for one, offers a $400 rebate to homeowners whose projects are Energy Star-certified.

“If you’re a homeowner, you couldn’t pick a better time to re-model,” says Tampa">Tampa Bay remodeler Guy Pearson. “If you want to upgrade your insulation, get better water heating, get new windows—there’s a lot of money to be given out to people who want to do it.”

What’s Covered by the Tax Credits
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.