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Home Improvement Tax Credits Available to Homeowners and Borrowers

 
   
 

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 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. 

 
   
 

Steps to Modifying Your Home Loan

 
     
 
  Petition for Changes
    Contact your lender and explain your hardship in order to request that your mortgage be modified.
 
     
 
  Receive an Offer
    If you qualify, lenders will typically lower your interest rate, lower the principal balance on the loan, or extend your term in order to decrease the amount you owe each month.
 
     
 
  Accept the Offer
    You can expect to wait between 3-6 months for your modification to complete.
 
     
     
 
Get a Quote
 
 

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