smart spending

Energy tax credits tempt homeowners

  • Federal tax credits offer money for energy-efficient remodeling.
  • Energy audit can help homeowners identify best projects.
  • Some lenders offer special financing for "green" home renovations.

Federal tax credits are helping to fuel demand for energy-efficient, "green" home remodeling projects.

Few people undertake major home remodeling projects simply to be more environmentally conscious, says Greg Miedema, president of Dakota Builders Inc. in Tucson, Ariz., and chairman of the National Association of Home Builders remodeling division.

"Nobody's going to replace windows because of a tax credit," he says.

However, if windows, doors or furnaces need replacement, now is the perfect opportunity to look for green alternatives that can save you money.

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Tax credits

Many of the federal tax credits are good only for the 2009 and 2010 tax years. These credits cover 30 percent of the cost of home-energy improvement projects up to $1,500.

Tax credits for other products -- such as those based on geothermal or solar technology -- cover 30 percent of the cost with no maximum amount and apply to projects undertaken through 2016.

A detailed list of the projects eligible for tax credits can be found on the U.S. Department of Energy's Web site.

The financial savings prompted Don Goldstein to install a geothermal heating and air-conditioning system in his Valrico, Fla., home this fall.

After researching government tax credits, "it really was a no-brainer," he says.

Rather than install a high-efficiency HVAC unit, Goldstein chose a geothermal unit, which makes use of the ground to provide heating and air conditioning. The U.S. Department of Energy calls it "among the most efficient and comfortable heating and cooling technologies currently available."

A high-efficiency HVAC unit would have cost $10,000 to $12,000 and qualified for a $1,500 credit. By contrast, the geothermal unit will net Goldstein a $4,500 credit for the $15,000 unit.

Since replacing his decade-old AC system, Goldstein's utility bills have dropped by "a couple of hundred dollars a month," at his 3,000-square-foot home, he says.

Energy audit

Unless your home is facing an obvious and imminent problem -- like a broken furnace -- you may not know where to begin when it comes to determining what upgrades make the most sense -- and cents.

Priorities vary greatly from home to home and region to region. For example, replacing an old furnace might make sense in New York, while cleaning and sealing ducts might be a top priority in Miami.


Or, if you're already planning to remodel your kitchen, it might be the time to add or upgrade insulation, says Harold Simansky, co-founder of the Green Guild, a company specializing in energy auditing and weatherization projects in Brookline, Mass.

A home energy audit is one way to discover which green renovations make the most sense. As part of these audits, an expert will look for energy inefficiencies in your home, such as areas where air is leaking, and suggest ways to correct them.

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