Energy Tax credits for energy efficient purchases aren’t going to be around forever. In fact, many of them have already gone the way of the incandescent light bulb. Sure, adjusting your thermostat a few degrees and making sure you changed out your furnace filter every few months was a good start, but to make real economical and environmental changes, upgrading to energy efficient appliances and energy generation systems is where the meat lies.
So, why do it now instead of waiting a few more years? First, prices have dropped nearly 50% on solar panel systems. Second, new appliances including energy efficient air conditioners and furnaces are up to 30% more efficient than ones made just 5 years ago. And going with a geothermal system, often the most expensive option, will pay for itself in under 15 years.
Oh yeah, and the tax incentives. 2013 is the last year for major energy tax credits for home improvements. So, if you like waiting until the last second, congratulations, it’s the last second. As a homeowner, you can get 10% off any authorized energy efficient product up to a total of $500 in credit. The products could be
- Exterior windows and skylights
- Exterior doors
- Metal or asphalt roof with pigmented coatings or cooling granules that are designed to reduce heat gain
- Water heaters
- Heat pumps
- Central air conditioners
- Hot water boilers
- Advanced main air circulating fans
A complete list can be found here. The energy tax credits can be taken both on the physical component and any labor needed to have it installed. These credits can only be used on your main residence, however.
In addition to the appliance and energy efficiency products, if you are looking to purchase an energy generator system (a home solar array, small wind turbine, geothermal heat pump or solar water heater) you can get a 30% tax credit with no limit. These energy credits can be taken on primary residences and secondary properties but rentals are not included.
All of these tax credits are taken against the base value of your home. The tax credit should be entered on line 52 of 1040 supplemental form 5695 (the residential energy tax credit).
Here’s one example of how much the tax credit could save you. A typical American home will require 600 sq. ft. of solar panels to fully power the home. The install cost is about $4 per watt, which puts a full $12,000 into a standard set-up. With a 30% tax credit, that takes nearly $4,000 off the installation and will cut the payback period from 12 to 8 years.
In addition to saving money on installing these items, you and your family can expect:
- Lower utility bills
- Better indoor air quality
- A more comfortable home
- A sense of environmental responsibility
We suggest you take advantage of these tax breaks now because the efficiency of units will not advance enough in the next 10 years to recoup the savings that you’ll miss out on.