Tax Credits
Tax Credits for Solar Water Heaters
February 10, 2010 by Financemyhome · Leave a Comment
Article From HouseLogic.com
By: Donna Fuscaldo
Published: October 22, 2009
A federal tax credit makes energy-efficient solar water heaters a more affordable and sustainable option for many homeowners.
A solar water heater uses the renewable thermal energy produced by the sun to warm water for your shower, washing machine, and dishwasher. Better yet, it does it at a fraction of the price of a conventional storage tank water heater. If you take the plunge and purchase a solar water heater, expect to see your home’s water-heating bill cut in half.
The financial attraction doesn’t end there. A federal energy tax credit that’s available through the end of 2016 allows homeowners to shave 30% off the cost of a solar water heater. Even new homes and second homes qualify.
How solar water heaters work
Solar water heaters operate (http://www.energystar.gov/index.cfm?c=solar_wheat.pr_how_it_works) in one of two ways: either as a direct system or as an indirect system. A direct system warms water by circulating it via pipes through rooftop solar collectors. An indirect system, also known as a closed-loop system, relies on a non-freezing heat transfer liquid.
The liquid is heated in the solar collectors and returns through pipes to a storage tank, where a heat exchanger inside the tank transfers the heat to the water. Most systems rely on electric pumps to move water (or a transfer liquid) between the storage tank and the rooftop solar collectors.
In general, solar water heaters can be used anywhere as long as your roof gets direct sunlight for most of the day. The rooftop collectors should face south. A direct system makes sense in warm climates where temperatures don’t fall below freezing. The non-freezing liquid used in an indirect system makes it better suited for cold climates.
You’ll need to retain your conventional water heater as a back-up at night, on cloudy days, or anytime a solar water heater’s capacity is exceeded. An average person uses about 15 to 20 gallons of water per day, so a family of four would likely need an 80-gallon water heater tank.
The cost of a solar water heater
A solar water heater starts at around $4,000 including installation, though the price tag could double depending on the size, quality, and complexity of the system. Figure it’ll take two to four days to install.
There’s no cap on the 30% federal tax credit, which applies to systems placed in service between Jan. 1, 2009, and Dec. 31, 2016. Solar water heaters must be certified by the Solar Rating & Certification Corp. (http://www.solar-rating.org/) to qualify. States may offer additional incentives. Check the DSIRE database (http://www.dsireusa.org/).
To earn the federal tax credit, at least half of your household’s energy for water heating must come from the sun. You can only count money spent on the solar water heater, not the entire heating system. You can’t claim the credit if the solar water heater is for a pool or hot tub.
Take the credit on IRS Form 5695 for the year you install the solar water heater. Remember to save receipts and manufacturer certification statements. The credit can’t exceed the total amount you owed in federal taxes for the year.
The savings can add up
According to Energy Star, a federal program that promotes energy efficiency, a solar water heater can lower the average household’s water-heating costs (http://www.energystar.gov/index.cfm?c=solar_wheat.pr_savings_benefits) by 50%. If you use a gas water heater, that translates to savings of $190 a year. You’ll save $265 annually if you have an electric water heater.
Savings are greater for large families that use a lot of hot water. How quickly you recoup your total investment depends on how much water you use, the amount of sun you get, the performance of your solar water heater, and how much it costs to heat up your water using your existing system.
If you’re building a new home or refinancing your mortgage, consider lumping in the cost of a solar water heater with the loan. By spreading the cost (http://www.energysavers.gov/your_home/water_heating/index.cfm/mytopic=12860) of the system over the life of your mortgage, you can take advantage of the tax deduction (http://www.houselogic.com/articles/deduct-mortgage-interest-home-equity-loans/) for mortgage interest.
According to the U.S. Department of Energy, you’ll pay an extra $13 to $20 per month to include the cost of a solar water heater in a 30-year mortgage. With the mortgage interest deduction that cost gets reduced by $3 to $5. The difference is about what you should save on your monthly energy bills.
Long life, little TLC
Solar water heaters have a life expectancy of 20 years or more, double that of conventional storage tank water heaters. They typically don’t require replacement parts for the first 10 years. It’s prudent to hire a qualified contractor to conduct annual inspections, as you might do with a furnace.
You can do your part by making sure the collector is clean, sealings aren’t cracked, and fasteners connecting the collector to the roof are tight. Whether for installation or maintenance, look for contractors certified by the North American Board of Certified Energy Practitioners (http://www.nabcep.org).
Solar water heaters not only save money-they save the environment. The DOE says a solar water heater can cut the electric load of your water heater by 2,500 kilowatt hours annually, which prevents 4,000 pounds of carbon dioxide from entering the atmosphere. That’s equal to not driving your car for four months a year.
This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.
Donna Fuscaldo has written about alternative energy for Dow Jones, the Wall Street Journal, and Fox Business News for more than a decade. She’s currently renovating her house with an eye toward energy efficiency and green technologies.
Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2009. All rights reserved.
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Tax Credits
Tax Credits for Replacing Your Roof
February 10, 2010 by Financemyhome · Leave a Comment
Article From HouseLogic.com
By: Gil Rudawsky
Published: September 16, 2009
Replacing your roof with a qualifying energy-efficient metal or asphalt roof can cut your cooling bill and earn you a $1,500 tax credit.
The roof of your house protects against more than rain. The sun’s rays beat down relentlessly, especially during summer. The intense heat can raise the temperature inside your home.
Proper venting and insulation help keep the cool air in and the warm air out. So, too, do energy-efficient roofing materials, which take the brunt of the solar onslaught. Uncle Sam is encouraging homeowners to improve the roofs of their primary residences with a tax credit worth up to $1,500.
During 2009 and 2010, you can claim a credit for 30% of the cost of qualifying asphalt or metal roofing materials. The credit, which should be taken on IRS Form 5695 for the tax year in which the work is completed, can be split between 2009 and 2010 but can’t exceed $1,500 total for both years. You can’t claim more in credits than you owe in taxes.
Metal vs. asphalt roofs
To qualify for the tax credit, you must use either metal or asphalt roofing materials that are designed to reduce heat gain-the amount of heat transferred into a home-and meet the requirements of Energy Star (http://www.energystar.gov), a federal program that promotes energy-efficient products and practices. Metal roofs must have appropriate pigmented coatings and asphalt roofs must have appropriate cooling granules. Asphalt materials can be either traditional shingles or modified bitumen (rolled asphalt sheets). Energy Star has a list (http://downloads.energystar.gov/bi/qplist/roofs_prod_list.pdf) of all of its approved roofing products, but only the metal and asphalt materials may qualify for the tax credit.
It’s a good idea to hang on to manufacturers’ certification statements (http://www.gerardusa.com/Energy%20Star/ESTaxCert.pdf) that attest to the tax credit-worthiness of the roofing materials you purchase. These can usually be found on product packaging or company websites. You don’t need to file these with your tax return, but the IRS could ask for them later. Consult a tax adviser.
Dean Kucharski, a 22-year veteran of the roofing business in Pontiac, Mich., estimates that for a typical 2,200-square-foot home, a mid-range asphalt roof will run about $7,000 to $12,000, including labor. The good news is that it will likely last 20 years or more. For a metal roof, expect to pay twice as much, though it can last for 50 years, he says. If you hire a contractor, get an itemized bill that breaks out the cost of materials since labor doesn’t count toward the tax credit. Materials should account for about half the bill on standard roofing jobs.
How much roof do I have?
You can get a rough estimate of how much roofing material you’ll need by figuring the square footage of the footprint of your home and adding about one-third more to account for roof pitch, overhangs, dormers, gables, and so on. Roofing contractors often quote in terms of “squares.” One square equals 100 square feet. So if a roofer says your house is 20 squares, it means it’s roughly 2,000 square feet-20 times 100.
Once you’re ready to pick a roof type, Kucharski suggests talking to an area building wholesaler or a company that specializes in roofing materials. It’s important to consult with someone who knows what types of materials are appropriate for a given region’s climate. Big-box retailers may not have as wide a selection or knowledgeable staff.
Finding a good roofer entails the same steps as finding any qualified contractor: ask neighbors for recommendations, collect at least three bids, check references, and get everything in writing. Craig Silvertooth, executive director of the Center for Environmental Innovation in Roofing (http://www.roofingcenter.org/), recommends finding a contractor through the National Roofing Contractors Association (http://www.nrca.net/), which has about 4,000 members.
Save on cooling bills
You’ll get the most bang for your roof-renovation buck if you live in a hot climate, namely the South and Southwest. Expect to save between 7% and 15% on your cooling costs with energy-efficient roofing materials, says Michelle Van Tijen of the Cool Roofs Rating Council (http://www.coolroofs.org/). If you pay $300 a month to cool your home, figure you’ll cut your monthly bill by up to $45.
Ironically, with roofs there is such a thing as being too energy efficient. In winter months, roofing materials with very high heat-deflecting qualities can increase heating bills. However, you’re more than likely to make up the difference on your air-conditioning costs. That’s especially true if you live in an area where you run your air conditioner much of the year.
Think hard before replacing a roof that’s in perfectly good shape. Consider instead a roof coating, a material painted over your existing roof that offers insulation and sun reflection, says Silvertooth. Roof coating costs about 75% less than replacing a roof, though it doesn’t qualify for the tax credit. Another affordable way to save on cooling costs that doesn’t even involve the roof is to add more insulation (http://www.houselogic.com/articles/tax-credits-adding-or-replacing-insulation/) to your attic. This home-improvement project can even be tackled by weekend warriors, and it qualifies for a federal tax credit.
This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.
Gil Rudawsky has been covering business and consumer issues as a reporter and an editor for 18 years, most recently as a business editor at the Rocky Mountain News. He lives in a house built in the 1930s, and always keeps the home’s character in mind when making upgrades.
Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2009. All rights reserved.
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Tax Credits
Tax Credits for Replacing Windows, Doors, and Skylights
February 10, 2010 by Financemyhome · Leave a Comment
Article From HouseLogic.com
By: Gil Rudawsky
Published: September 09, 2009
If money seems to be escaping through drafty windows, doors, and skylights, this federal tax credit might make energy-efficient replacements more affordable.
Does it feel like money is escaping through your home’s drafty windows, doors, and skylights? You might be able to keep at least some of that cash in your pocket by taking advantage of federal energy tax credits for retrofitting your house with qualified energy-efficient replacements. You can claim a tax credit of up to $1,500 for upgrading the windows, exterior doors, and skylights in your primary residence during 2009 and 2010.
The credit is based on 30% of the cost of materials, so a $5,000 purchase would max it out. But a tax credit alone isn’t reason enough to start calling contractors. Do a little homework first. The true value of replacing aging windows, doors, and skylights isn’t always an open-and-shut case.
Follow the 15-year rule for windows
A good rule of thumb for window replacement: Don’t bother if they’re less than 15 years old, says Jim Rooney, a home inspector in Annapolis, Md. The savings on your energy bills likely will be negligible since window technology hasn’t changed that radically and the integrity of your windows should still be intact. Shoddy installation or poor manufacturing may call for exceptions to the 15-year rule. Windows that are 20, 30, or more years old are prime candidates for replacement.
Most of your focus should be on windows, since they’re more numerous, but skylights are notorious for energy loss too, not to mention water leaks. Exterior doors tend to outlast windows, so keep them unless the upgrade is purely for aesthetic reasons. Besides, weather stripping and snug sweeps can boost the energy efficiency of exterior doors for a whole lot less money.
Adding up the costs-and savings
With windows, doors, and skylights, you get what you pay for. Expect to shell out between $500 and $1,000 per window including installation, or about $10,000 total for a moderately sized house of about 2,000 square feet. New energy-credit-qualified doors and skylights are also in the $500 to $1,000 range, including installation.
Tom Herron, of the National Fenestration Rating Council (http://www.nfrc.org), says products on the higher end of the cost scale are usually better constructed and more energy efficient. NFRC is a non-profit organization that administers the rating and labeling system for the energy performance of windows, doors, and skylights.
It could take years to recoup the upfront costs, but you should see an immediate reduction in your energy bills. In general, you’ll save $126 to $465 a year if single-pane windows in a 2,000 square foot house are replaced with tax-credit-eligible windows, according to the Efficient Windows Collaborative, a trade group. That’s 15% to 40% off the typical energy bill.
Do my replacements qualify?
A label alone doesn’t guarantee your new windows, doors, and skylights qualify for the energy tax credit, but it does provide critical information related to eligibility. To qualify, windows, doors, and skylights must have a U-factor (http://www.efficientwindows.org/ufactor.cfm) of 0.30 or less and a Solar Heat Gain Coefficient (http://www.energycodes.gov/support/shgc_faq.stm) (SHGC) of 0.30 or less. The U-factor measures how well a product prevents heat from escaping, and the SHGC gauges how well a product blocks heat from the sun. Labels also carry information on light transmission, air leakage, and condensation resistance.
Herron, of the NFRC, says about 80% to 85% of the manufacturers in North America provide NFRC labels. All Energy Star qualified windows carry an NFRC label (http://www.nfrc.org/Label.aspx), according to Energy Star, a joint program of the U.S. Department of Energy and the U.S. Environmental Protection Agency that promotes energy-efficient products and practices.
Resist the urge to trim costs by purchasing cheaper windows, doors, and skylights with poor U-factor and SHGC ratings. Not only will you miss out on the tax credit, energy bills won’t come down much.
Taking advantage of the tax credit
A credit is especially valuable because it directly reduces the amount of tax owed, as opposed to a deduction, which lowers the amount of taxable income. To be eligible for the full credit you must owe more in federal taxes than you’re trying to claim. Use IRS Form 5695 to take advantage of the credit, which is cumulative for 2009 and 2010 only. You can’t claim $1,500 for each tax year, but you can spread the $1,500 over the two-year period.
Uncle Sam may want proof that your new windows, doors, and skylights meet energy-efficiency standards, so be sure to save receipts, product stickers, and certification statements. The latter can often be found on packaging or manufacturers’ web sites. As for receipts, ask contractors to itemize expenses. Installation costs aren’t eligible for the credit; only materials are.
Keep in mind that a variety of energy-efficiency improvements to your existing home, including insulation, roofs, and HVAC, count toward the credit limit. You can’t claim separate $1,500 credits for each upgrade, nor can you claim the credit for a newly built home. Matt Golden, president and founder of San Francisco-based Sustainable Spaces (http://www.sustainablespaces.com), says homeowners can often lower energy costs for a lot less, and still get the tax credit, by insulating attics (http://www.houselogic.com/articles/save-money-with-insulation-upgrade/) instead.
This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.
Gil Rudawsky has been covering business and consumer issues as a reporter and an editor for 18 years, most recently as a deputy editor at the Rocky Mountain News. He lives in a house built in the 1930s, and always keeps the home’s character in mind when making upgrades.
Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2009. All rights reserved.
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Tax Credits
Tax Credits for Replacing Heating and Cooling Systems
February 10, 2010 by Financemyhome · Leave a Comment
Article From HouseLogic.com
By: Suzanne Cosgrove
Published: September 21, 2009
Upgrading to an energy-efficient heating and cooling system can save hundreds on your utility bills and earn you a tax credit worth as much as $1,500.
Replacing an aging heating and cooling system can save you money over time. According to Energy Star, a federal program that promotes energy efficiency, about half of what the average household spends on energy bills goes toward heating and cooling.
Upgrading your heating, ventilation, and air conditioning (HVAC) to energy-efficient units can cut utility costs by about 20%, or $200 annually, on average. A tax credit for heating and cooling systems can make the project more affordable.
This type of home improvement doesn’t come cheap. Prices vary widely based on where you live, unit specifications, and the condition of your home, but figure a high-efficiency furnace will start at around $3,500, including installation, estimates Corbett Lunsford, executive director of Chicago-based Green Dream Group. A standard furnace may cost $2,400. To help offset the price difference, the IRS allows a tax credit worth up to $1,500 on eligible HVAC systems put into service during 2009 or 2010. Consult a tax adviser.
Pay attention to efficiency ratings
To earn an Energy Star rating, furnaces must be more efficient than standard units, with annual fuel utilization efficiency ratings, or AFUE, of 85% for oil furnaces and 90% for gas furnaces. The Energy Star seal of approval alone isn’t enough to garner the federal tax credit. Credit-eligible (http://www.energystar.gov/index.cfm?c=tax_credits.tx_index#c3) gas furnaces (either natural gas or propane) must have AFUE ratings of 95% or greater; oil furnaces, 90%. A boiler must have an AFUE of 90%.
Heating by burning a fuel is inherently inefficient. Simply put, high-efficiency furnaces have components that are better designed to get more heat out of the combustion process, Lunsford says. You’ll need to hire an HVAC contractor to calculate the size of the equipment needed for your home. Beware bidders who take a one-size-furnace-fits-all approach. Air source heat pumps (http://energystar.custhelp.com/cgi-bin/energystar.cfg/php/enduser/std_adp.php?p_faqid=5799) and advanced main circulating fans can also qualify for the $1,500 tax credit.
Technically, a homeowner could replace either a furnace or a central air-conditioning unit and be eligible for the tax credit. Practically speaking, you probably will have to replace both for the A/C to qualify, says Enesta Jones, a spokeswoman for the U.S. Environmental Protection Agency. Most homes have split systems made up of an outdoor condenser and compressor that are connected to an indoor air handler that’s part of the furnace. Split systems must have a SEER rating of at least 16 and an EER rating of at least 13. The higher the rating, the more energy efficient the unit. A package A/C system, which houses all of its components outdoors, requires lower ratings.
HVAC’s value goes beyond savings
It typically takes about a decade’s worth of energy savings to recoup the investment in a new HVAC system, Lunsford says, though that time frame can vary greatly depending on how much fuel prices fluctuate. Less apparent in dollar terms are increasing the comfort level in your home and lowering your household’s drain on non-renewable fossil fuels. Then there’s the effect on your home’s value when it comes time to sell.
You’re going to enhance a home’s salability by moving to a more energy-efficient heating and cooling system, says Frank Lesh, president of Home Sweet Home Inspection Co. in Indian Head Park, Ill. That doesn’t mean adding a $5,000 furnace will add $5,000 to the sale price. Rather, potential buyers are less likely to push for repairs or negotiate a credit if the HVAC is in good shape. Evaluate systems older than 10 years for possible replacement.
But before you do, conduct a wider energy audit (http://www.houselogic.com/articles/conduct-your-own-energy-audit/) of your home. Lunsford, also manager of consumer education for the U.S. Green Building Council’s Chicago Chapter, says he rarely recommends replacing a furnace as the first step in making a home more energy efficient. Instead, start by sealing it against air leaks. Do-it-yourself caulking and weather-stripping help, as does adding insulation in the attic. Professional air sealing, which is more effective, can cost as much as $5,000 for a large house, he says. The payoff: Energy costs should go down, and you might be able to get by with a smaller HVAC system.
Getting tax credit for your upgrades
The federal energy tax credit is based on 30% of the cost of an eligible HVAC system. Installation charges count too. A $5,000 bill would max out the credit. You’ll need to owe more in taxes than you’re trying to claim in credits to qualify. Use IRS Form 5695. Save receipts for your records, as well as manufacturers’ certification statements. If part of a new HVAC system qualifies for the credit but another part doesn’t, ask the contractor to itemize the receipt.
The tax credit is aggregated for all qualifying energy upgrades-insulation, roofs, windows, and so on-so you can’t claim separate $1,500 credits for each project. Only improvements to your existing primary residence count. New homes and second homes are excluded.
This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.
Suzanne Cosgrove, who spent nine years as an editor at the Chicago Tribune, has written for a number of business and real estate publications. She has a 90-year-old house and a long list of home-improvement projects.
Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2009. All rights reserved.
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Tax Credits
Tax Credits for Adding or Replacing Insulation
February 10, 2010 by Financemyhome · Leave a Comment
Article From HouseLogic.com
By: Gil Rudawsky
Published: September 09, 2009
A federal tax credit makes adding insulation an even cheaper way to improve your home’s energy efficiency and cut your heating and cooling bills.
If putting a dent in your home’s heating and cooling bills is a priority, then adding insulation needs to be at the top of your to-do list. It’s a relatively affordable home-improvement project, and the savings can be felt almost immediately. Some DIYers can even tackle the project themselves over a weekend.
For a 2,200 square foot home, adding insulation to an attic can cost from $1,000 to $2,500 including labor, depending on how much you put in and how easy it is to install. Effort and expense go up when you add insulation to exterior walls or around hard-to-reach ductwork. A federal energy tax credit worth up to $1,500 can help defray the cost.
It all comes down to R-value
Insulation is measured in R-value, the resistance to heat flow. The higher the number the better the insulating power. The U.S. Department of Energy recommends R-values (http://www1.eere.energy.gov/consumer/tips/insulation.html) between 30 and 60 for most attics. Take a peek in yours. If your insulation is level with or below the attic floor joists, then you probably need more.
There are different types of insulation, including fiberglass, cellulose, mineral wool, spray foam, foam board, and cotton batting. The most familiar is pink fiberglass roll insulation. If you’re not sure what’s best suited for your home, check with an insulation contractor. Just about all insulation qualifies for the energy tax credit (more below) as long as its primary purpose is to insulate-insulated siding, for example, doesn’t count-and it brings your home up to recommended R-value guidelines.
Energy Star (http://www.energystar.gov/index.cfm?c=home_sealing.hm_improvement_insulation_table), a joint program of the DOE and U.S. Environmental Protection Agency, suggests R-38 insulation for most attics (or about 12-15 inches, depending on the insulation type). In colder climates, R-49 may be required. The DOE’s online calculator (http://www.ornl.gov/sci/roofs%2bwalls/insulation/ins_16.html) can recommend R-values for all areas of your home’s “envelope”: attic, walls, floors, basement, and crawl spaces.
Generally, most homes built before 1980 have inadequate insulation. The easiest insulation to add is blown loose-fill insulation. You’ll probably need to hire a contractor. Since insulating an attic isn’t too complicated, you can get quotes-at least three-by phone. However, get a copy of the quote in writing before work starts, and be sure it specifies R-value. Michael Kwart, executive director of the Insulation Contractors Association of America (http://www.insulate.org/), recommends rolled insulation for do-it-yourselfers. New insulation can be added on top of existing insulation.
Savings and sustainability can add up
Depending on where you live and how much insulation you already have, adding more can trim heating and cooling costs anywhere from 10% to 50%. A homeowner in the Northeast with an uninsulated attic, for instance, can save about $600 a year by adding about 15 inches of insulation (R-38) between the rafters, according to the Energy Department. Just 6 inches can net annual savings of about $200.
The $1,500 federal tax credit (http://www.energystar.gov/index.cfm?c=tax_credits.tx_index) can be applied toward 30% of the cost of insulation installed in your primary residence during 2009 and 2010. Let’s say you spend $1,760 on enough R-38 roll fiberglass to insulate the attic of your 2,200 square foot home. That’s $40 per 50 square feet retail, a fair estimate. You’ll be able to subtract $528 (30% of $1,760) straight off the top of your tax bill, as long as you paid more in federal taxes than you’re claiming in credits. Since a typical homeowner won’t be able to use up the entire tax credit on insulation alone, the remainder can be applied to other qualifying energy-efficiency upgrades like new windows (http://www.houselogic.com/articles/tax-credits-replacing-windows-doors-and-skylights/) or roofing (http://www.houselogic.com/articles/tax-credits-replacing-your-roof/). Just keep in mind that the total credit claimed for all of these improvements can’t exceed $1,500 for the two-year period.
Save receipts, and if a contractor did the work, get a receipt that’s itemized. Labor costs, typically 25% of the total bill, according to Kwart, don’t count toward the tax credit. There’s no need to file receipts when you claim the credit on Form 5695, but the IRS could ask you to cough one up later. Also hold on to product stickers from packaging that show R-values and manufacturers’ certification statements that attest to tax-credit worthiness. Check manufacturers’ websites for a copy of the statement. If you’re building a new home, you’re out of luck; only existing homes qualify for this tax credit, which can’t be carried over into future years.
Adding insulation is just the beginning
In conjunction with adding new insulation, conduct a whole-house energy audit (http://www.houselogic.com/articles/professional-energy-audits-the-costs-and-benefits/) to find other ways to reduce power consumption and save even more on monthly bills. Caulk around drafty windows and doors, and stop gaps in siding and the foundation, says Matt Golden, president and founder of San Francisco-based Sustainable Spaces (http://www.sustainablespaces.com/). Reducing a home’s air leakage by 25% can lower annual energy costs by about $300, according to the Lawrence Berkeley National Laboratory (http://www.lbl.gov/).
This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.
Gil Rudawsky has been covering business and consumer issues as a reporter and an editor for 18 years, most recently as a business editor at the Rocky Mountain News. He lives in a house built in the 1930s, and always keeps the home’s character in mind when making upgrades.
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