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While it may seem like nothing more than taking on the burden of more debt, a new loan or line of credit that is well spent can actually be a terrific bonus when tax time comes around. For several years, the federal government has been offering tax credits for homeowners who update their properties with certain Energy Star products. These products are typically the highest quality and most energy-efficient, which means that not only will they save you in future replacement costs, but they will also save you money when it comes to the cost of heating and cooling your environment. What's more Ð you can get money back on your income tax for using them in your renovations!
With the potential for savings and credits so high, it frequently makes sense for home owners who are in good financial condition to take out a home equity loan or HELOC to pay for Energy Star related remodeling. By the time you deduct the interest on the loan from your taxes and get a credit from the government for your purchases, you may discover what a smart investment you have made!
Tax
Credits for Updates to Existing Homes
There are various things that can be done to an existing home to
improve how efficiently it manages the use of electricity, gas, and oil
in heating and cooling. Your choice of appliance
certainly matters (and may earn you rebates at the state and local
level, so be sure to check on that when you make a purchase), but so do
big items like the following. These are eligible for credits
of 30% of the cost of your purchase, up to $1,500, in 2009 and
2010.
- Windows and Doors:
Energy Star rated windows are extremely high quality to avoid drafts
and loss of hot or cold air from within your house.
- Insulation:
One of the best ways to prevent wasted heating and cooling costs is to
treat your home with the best insulation on the market.
Replacing insulation in your attic and outside walls is especially
important.
- Roofs:
Both metal and asphalt roofing materials can qualify for this
program. The right kind of roof helps to keep your home
insulated from extreme temperatures, and a new one can often be a
costly prospect. All the more reason to consider a home
equity loan to finance the project in an affordable way.
- HVAC:
When it comes to furnaces and air conditioners, hvac contractors know there is great
potential for waste if the units being used are inefficient, out of
date, or faulty.
- Water Heaters: Like
furnaces and air conditioners, water heaters can also be a source of
lost resources – and lost money. Installing one
that is energy efficient, especially one that provides
“instant hot” water instead of maintaining the
water temperature all day, even when the hot water is not in use, can
be a great way to save in the long run!
- Biomass Stoves:
Biomass stoves operate with the use of corn or pellets, rather than
coal, oil, or gas. They are better for the environment
because the resources they burn are renewable. They are also
able to burn cleaner and without emitting such harsh gases into the
air.
Credits
for New Construction Homes (and Existing Ones)
If you are in the process of building a home, you can also get tax
credits if you have certain features installed. Existing
structures also qualify when they add the following:
- Geothermal Heat Pumps:
These are used for central heating and cooling. They operate
using the earth's natural heat, which is a nice, even 50* or so,
meaning that they can deliver both warm and cool air with much less
effort than burning fuel can.
- Solar Products:
Various things like water heaters and solar panels are eco-friendly and
a very good way to increase the energy efficiency in your house.
- Small Wind Energy Systems:
If you have property, you can install a small number of machines to
convert wind into energy both for your home and to sell back to your
local electric company. Wind energy is renewable and clean!
- Fuel Cells:
Like the other modern, energy-efficient products above, fuel cells are
a clean way to provide power to operate your furnaces and other
appliances.
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