Federal & State Energy Incentives At Work

by Joel Barkman, NVBIA Fauquier County Chapter President

Earlier in the year I explained how homeowners can claim up to $1,500 in expanded energy-efficiency tax credits for remodeling their principal residence to reduce energy consumption.

Since that time my team and I have been busy - relatively speaking - retrofitting several homes with more efficient windows and doors, upgraded insulation, and performing some basic to advanced weather sealing.

The revamped Existing Home Retrofit (25C) Tax Credit helps consumers save two ways: on their costs and on their utility bills.

"Remodelers can help find the best methods of saving energy in your home with an assessment, like a home energy audit," explained National Association of Home Builders (NAHB) Remodelers Chairman Greg Miedema. "Tightening the house to reduce air leakage by adding insulation, fixing ducts, and installing a more efficient heating and air conditioning system can help save on energy bills today while also reducing next year's tax bill."

The expanded federal tax credit refunds 30 percent of the product replacement cost up to a total of $1,500. It can also be used for HVAC systems, water heaters, biomass stoves (i.e. wood, pellet, corn, etc.), and certain roofing applications as long as the new products meet IRS qualifications. In some cases, installation costs may also be used to claim the tax credit.

Home energy audits can cost as little as $500, which remodelers say is an expense that pays for itself-and more-with savings from efficiency upgrades. And homeowners may be able to combine federal tax credits with local and regional incentives to maximize savings.

Here's one example: Insulation improvements may be one of the easiest and most affordable ways to save on energy costs. Upgrading inefficient insulation (from R-19 to R-38) in the attic of a two-story, 2,000-square-foot home might cost around $1,000, but the tax credit brings that down to $700 - for an estimated utility savings of 15 percent.

In this area that is a payback of approximately 4 years and as utility providers and the state get onboard with additional rebates the payback period could be cut in half.

Inspecting the ductwork, caulking and heating and cooling systems for possible upgrades or enhancements also help to provide additional energy savings.

Consider your aging heating and cooling components. For example, upgrading a standard 10-year-old air conditioner to today's federal minimum 13-SEER (Seasonal Energy Efficiency Ratio) model may cost about $5,500, but does not qualify for the tax credit. Spending as little as $2,000 more for a higher-efficiency air-conditioner (such as 16-SEER) earns the homeowner the $1,500 energy-efficiency federal tax credit.

Plus, Virginia's energy efficiency stimulus rebate of $1,500, the cost difference can be paid back in a couple of years, while the homeowner may enjoy utility bills savings for years to come. We are still waiting for the details, but Virginia is slated for $28 million in federal funds to help encourage homeowners to become more energy efficient. The stimulus plan calls for, in addition to the Federal Energy Tax Credit, a 20 percent rebate up to $2,000 for qualified energy efficient products.

With credits and rebates, tankless water heaters are comparable in cost to traditional gas water heaters, but last as long as 20 years and are 30 percent more efficient, according to Eugene Lamana, residential business manager at Rinnai, a manufacturer of tankless water heaters and other gas appliances.

"These are just some examples of how the energy-efficiency tax credit helps consumers save money in making home improvements and cutting down utility bills," said Miedema. "Homeowners should contact a professional remodeler near them for advice on installing tax credit-qualified improvements in their home."

Homeowners can use an energy-savings simulation from the NAHB Research Center at http://energysim.toolbase.org to determine likely costs of upgrades and savings. Information on rebates from utility companies and other state and local government incentives is available at www.dsireusa.org.

In addition to expanding the 25C tax credit, the Wind, Solar, Geothermal and Fuel Cell (25D) Tax Credit for renewable energy products now provides larger incentives for installing geothermal heat pumps, solar panels, solar water heaters.

Although the upfront costs are high for these high performance products, the tax credit is 30 percent - which in many cases covers the initial cost to upgrade from standard products - and there is no cap on their cost through 2016. Taxpayers can claim the credits on IRS Form 5695.

For more information about the tax credit, visit www.nahb.org/efficiencytaxcredit or just "Ask a Builder."

As always e-mail your questions and comments to joel@goldenrulebuilders.com or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119

Barkman is president of the Fauquier Chapter of The Northern Virginia Building Industry Association.

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