As a home owner, you should be looking for every tax break that the government gives. Every new break is extra money that you can use for your own purposes! The energy-efficient tax credit is a relatively new initiative that the government has implemented in order to create incentive for people to switch to greener solutions. Here are the basics of the energy-efficient tax credit and how you can save money from it.
What is the energy-efficient tax credit?
The energy-efficient tax credit is an umbrella term for many programs that are initiated by Congress to give tax incentives to home owners who are willing to improve their homes with energy efficient solutions. Some of these credits come from specific programs such as the Residential Energy Property Credit initiative, and others come from simple lists of improvements that the government puts out. Most of the programs that are put forth by the government are a product of the American Recovery and Reinvestment Act.
What are the government agencies involved in energy efficiency?
The United States Department of Energy is at the head of providing energy-efficient products and advice for homeowners. The Energy Star brand is a voluntary program from the United States Environmental Protection Agency (EPA) that labels products that have been proven to lower the energy use of most households when compared to comparable products across the industry.
What is the Energy Star brand?
You may have seen the Energy Star sticker on light bulb packaging or other electrical products. The marking certifies that the product has been vetted by the Energy Star program of the EPA. Since 1992, the Energy Star program has helped to promote research and development towards the reduction of energy consumption and pollution and the improvement of energy security.
Energy Star is not a company that manufactures products, and participation in the Energy Star program is a voluntary enterprise for businesses that focus on home energy products. However, being labeled as an Energy Star product does help to guarantee a certain level of positive notoriety and exposure for the products of private companies. As such, many of the top manufacturers of home electronics and engineering products make it a point to participate. Presently, Energy Star has over 16,000 partners and represents products in over 70 categories.
In exchange for research and development towards energy efficient properties within these private companies, Energy Star provides promotion, marketing, and general goodwill for products that actually fulfill these standards. Homes may also be certified through the Energy Star program, placing them in the front of the line for many energy-efficient tax credits.
What are some of the items that are eligible for an energy-efficient tax credit?
If the home in question is your principal residence, then you can obtain tax credits for improving the energy efficiency of your biomass stoves, air conditioning, hot water boilers, insulation, water heaters, and roofing. The tax credit is 10 percent of the cost of improvement up to $500.
Homes can gain even more valuable tax credits by improving to geothermal heat pumps, residential small wind turbines, microturbine fuel cell systems, or solar energy systems. This tax credit is for 30 percent of the cost of improvement with no maximum limit.
What is the process for verifying energy efficiency in my home?
Homes can qualify for Energy Star certification and a quicker path to tax credits through two pathways: the Prescriptive Path and the Performance Path.
The Prescriptive Path lists a predefined list that a home owner implements in order to receive certification of the home. The Performance Path allows a home owner to customize the upgrades. For both paths, the National Program Requirements set the minimums and specifications. There are four inspections that must be completed for the Energy Star requirements to be met: the Thermal Enclosure System Rater Checklist, the HVAC System Quality Installation Rater Checklist, the HVAC System Quality Installation Contractor Checklist, and the Water Management System Builder Checklist. The final purpose of these checklists is to improve indoor air quality, durability, and comfort.
Commercial buildings are also eligible for energy-efficient tax credits. These buildings must be verified by a Licensed Professional in order to apply for Energy Star certification and a beeline to tax credits.
What are the other advantages of energy-efficient tax credits?
The tax credits are not the only advantage that energy efficient home owners receive. The Energy Star certification also certifies that the appliances and home electronics in your house are actually using less energy. You will receive lower power bills: For instance, a clothes washer that is Energy Star certified will save you about 70 percent of the energy you would otherwise use along with 75 percent of the water.
There is virtually no downside to pursuing energy-efficient tax credits, because you save in at least two ways. Make it a point to have your house certified by Energy Star through the processes that are detailed above. Not only will you skip the line and maximize your tax credits, but you leave a smaller carbon footprint and save money as well.
2 Point Highlight
The Energy Star brand is a voluntary program from the United States Environmental Protection Agency (EPA) that labels products that have been proven to lower the energy use of most households when compared to comparable products across the industry.
There are four inspections that must be completed for the Energy Star requirements to be met: the Thermal Enclosure System Rater Checklist, the HVAC System Quality Installation Rater Checklist, the HVAC System Quality Installation Contractor Checklist, and the Water Management System Builder Checklist.
