Making energy-efficient home improvements will not only cut your cooling costs this summer but can also provide a sizable break on your tax bill come tax season.
Thanks to the federal government's economic stimulus package, which passed in February, consumers can receive tax credits for up to 30% of the cost to make energy-efficiency improvements to their homes, such as adding insulation or replacing windows. The maximum $1,500, one-time-only credit is a significant jump from the $500 offered in years past and will be available through 2010. (Many of the previous credits expired at the end of 2007.)
Both the tax and energy savings could really add up, especially considering that the average household spends $1,000 a year on heating and cooling costs, says Ronnie Kweller, a spokeswoman for the Alliance to Save Energy.
Still, many of these purchases, such as central air conditioners and a new Energy Star-rated roof, are so expensive that consumers must weigh the upfront costs with potential savings (often, installation costs won't count toward the credit).
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Keep in mind that you might not receive that 30% tax credit for months after a project's completion. And in some cases, such moves may not be worth it. Ideally, you want to replace the roof, A/C unit or insulation when they can no longer offer any savings on your cooling and heating bills, and that usually happens when they reach the end of their life spans, Kweller says.
Knowing which products qualify for the new tax credits can also be tricky. For example, previous tax credits were doled out to consumers who purchased Energy Star windows. After June 1, not every Energy Star-certified window qualifies, and the ones that do adhere to stricter eligibility requirements.
Here are four home improvements that can help you cut your summer energy costs and get Uncle Sam to pick up part of the tab:
Adding insulation
Insulation is the cheapest home improvement that qualifies for the tax credits, says Karen Schneider, a spokeswoman for Energy Star. And by installing it you could save up to 20% on your energy bills.For the new insulation to qualify, it must meet the 2009 International Energy Conservation Code (check product labeling or call the manufacturer) and carry a two-year warranty (or be expected to last five years).
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If your home is less than five years old, you won't need new insulation, Schneider says. If your home is older, measure the thickness of the insulation in your attic. Insulation is measured in R-values, which stands for thermal resistance. It should range between R-30 and R-60 (for the northern parts of the country), Schneider says. Every three to five R-values typically equal an inch of insulation, so R-30 could range between 6 and 10 inches, according to the Alliance to Save Energy. Also check the insulation in your crawl space or basement.
Click here for directions on installing insulation. Or hire a professional contractor, but remember that installation fees won't count toward the tax credit.
Continued: Replacing windows and doors
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