Besides the obvious personal discomfort involved, freezing temperatures tend to highlight the costs and other consequences of a less-than-energy-efficient home.
Whether you’re concerned with reducing your monthly expenditures, saving the environment―or just staying warm―energy-saving improvements to your home can provide important benefits. In fact, such improvements can reduce your energy costs by as much as a third while significantly reducing carbon emissions. They can also enhance your home’s value.
If you’re considering upgrading your home’s energy efficiency, 2010 may be the year to do so affordably. An important tax credit expires at the end of this year.
Nonbusiness Energy Property Credit
The federal Nonbusiness Energy Property Credit for individual taxpayers is equal to 30 percent of the cost of qualifying improvements placed in service during the two-year period expiring December 31, 2010.
Qualifying improvements include certain roofs, exterior windows and doors, storm windows, skylights, insulation, central heating and air conditioning systems, hot water boilers and biomass stoves. With the exception of windows, doors and skylights, qualifying costs include labor.
These improvements must be made to your existing primary residence located in the United States―not a second home or vacation home―and the original use of the improvements must commence with you.
The tax credit is limited to a maximum aggregate credit of $1,500 for all qualifying improvements that you placed in service during 2009 and 2010. Significantly, there is no income limit and, if you’re subject to the alternative minimum tax (AMT), you can use the credit to offset your AMT.
Generally, the improvements must meet certain performance and safety standards, such as ENERGY STAR qualification, IECC requirements, or minimal expected life or warranty period, among others. Some improvements may also require a manufacturer’s certification.
Residential Energy Efficient Property Credit
This federal tax credit for individual taxpayers, which doesn’t expire until December 31, 2016, is generally equal to 30 percent of the cost of qualified alternative energy property. As with the Nonbusiness Energy Property Credit, there is no income limit and you can use the credit to offset your AMT.
Qualifying improvements include solar electric systems, solar hot water heaters, wind turbines, fuel cell property and geothermal heat pumps, including the cost of labor. With the exception of fuel cell property, there is no limit to the amount of the credit. For fuel cell property, the tax credit is limited to $500 per half kW of capacity.
These improvements can be made to your new or existing primary residence, second home or vacation home located in the United States. Rental properties do not qualify.
Homeowner Improvement Exemption for Property Taxes
If your energy-efficiency improvements can be considered part of a home remodel or weatherization project, as opposed to normal home maintenance, you may also be eligible for property tax relief.
For example, in King County, if your home is a single family dwelling, the improvements you make may qualify for three years of property tax relief based on the value of the improvement. This exemption is limited to 30 percent of the home’s pre-improvement assessed value.
Additional Incentives for Washington Residents
Washington state―and many other states and local governments, and some utility companies―offer tax incentives for investments in energy-efficient products.
For example, this year Washington state offered rebates under the Residential Energy-Efficient Appliance Rebate Program for a number of ENERGY STAR appliance installed in Washington homes―including refrigerators, clothes washers, certain water heaters, and ductless heat pumps. As of November 15, all of the rebate funds have been committed.
Puget Sound Energy, Tacoma Power, Tacoma Water, Cascade Water Alliance and the City of Renton are among the other organizations that also participate in the WashWise clothes washer rebate program.
For information on other incentive programs, refer to DSIRE (Database of State Incentives for Renewable Energy). DSIRE is a comprehensive resource for information on incentives offered at state, local, utility and federal levels that promote renewable energy and enhanced energy efficiency.