Energy tax credits tempt homeowners

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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.

Many public utility companies offer free energy audits. Another option is to hire a professional energy auditor, such as one certified by the Building Performance Institute in Malta, N.Y., Barrows says. These audits may be more comprehensive than a free energy audit.

Most people “need someone to help them sort through the different choices they are going to be making,” to determine the costs of the projects and the return on investment, Simansky says.

“There’s really no house that couldn’t benefit from a good energy audit,” he says.

Audits typically range from $250 to $1,000, and some utility companies offer customers a rebate if they have an audit done by a private company.

A survey by the National Association of Home Builders found that in the third quarter of 2009, the most commonly installed energy-efficient products were:

  • Energy-efficient windows.
  • Upgraded insulation.
  • Insulated doors.
  • Energy-efficient HVAC units.

Requests for tankless water heaters also have risen significantly in recent years, according to the NAHB.

John Barrows, a Long Island, N.Y., builder and co-author of “The Complete Idiot’s Guide to Green Building and Remodeling,” advocates starting with “low-hanging fruit,” such as caulking around windows to make sure they are airtight.

Green financing

Once you’ve decided on a project, you may need financing. Some financial institutions also offer lower interest rate loans for green projects.

For example, Addison Avenue Federal Credit Union — based in Palo Alto, Calif., but with branches in 16 states — has partnered with SunPower Corp. in San Jose, Calif., to provide up to $50,000 in financing for solar energy products for its customers. Homeowners who install solar energy products may be able to write off up to 30 percent of the cost.

The product was introduced this year, and already the credit union is doing more than $1 million in loans each month, says Scott Pellegrini, Addison Avenue consumer lending product manager.

At Technology Credit Union in San Jose, Calif., Living Smart home equity loans were introduced in August with a fixed rate of as low as 5.75 percent for amounts up to $50,000, says Kathleen Litman, vice president of marketing.

The loans can be used for improvements such as upgraded windows, doors and insulation. The included products are listed on the Energy Star section of the U.S. Department of Energy’s Web site.