That new imported gelato maker is loads of fun. So is the larger-than-life plasma HDTV you recently installed.
Alas, these home purchases made dents in your wallet but they will
not affect your 2009 tax returns. There are, however, myriad
energy-focused home improvements that do qualify for rebates and tax
credits.
Residential energy credits for 2009 belong on Form 5695, says Kathleen Wallenburg with H&R Block in Longmont.
"Credit 1, the residential energy efficient property credit, is for
tax years 2009 through 2016," she says. "This credit is for qualified
residential alternative energy equipment. The credit, for 30 percent of
the cost of equipment, includes labor costs for on-site preparation,
assembly, installation, piping and wiring for equipment."
What's more, she says, "there is no dollar-amount limitation" for this credit, which is for the taxpayer's main residence.
"This can be a house, houseboat, mobile home, cooperative apartment,
condominium, or a manufactured home that conforms to the Federal
Manufactured Home Construction and Safety Standards," Wallenburg says.
So what is alternative energy equipment? It includes qualified solar
electric property, qualified solar water heating property, qualified
fuel-cell property (this does not include fuel cells used for swimming
pools or hot tubs), qualified small wind-energy property, and qualified
geothermal heat pump property.
Credit 2, the non-business energy property credit, applies to tax
years 2009-2010. "This credit applies to improvements such as adding
insulation, energy-efficient exterior windows, and energy-efficient
heating and air-conditioning systems," Wallenburg notes. "The credit is
30 percent of the cost for a maximum limit of $1,500. For example, if a
taxpayer used $1,000 of the credit on their 2009 tax return, then there
is only $500 of credit left for their 2010 tax return."
The IRS has made it easier for taxpayers to consider
doing some energy- efficient changes in homes this year. Just be sure
you see the "Energy Star" symbol on any new equipment, Wallenburg says.
Here comes the sun
If you installed a solar electric system in your home during 2009,
you can anticipate the accompanying federal tax credit of 30 percent.
"A tax credit is much better than a tax deduction because it's a
straight dollar-for-dollar credit," says Dan Yechout with Namaste
Solar. "Rebates through Xcel Energy typically reduce the upfront cost
of a solar system by 40 to 50 percent, making the out-of-pocket cost of
an average system about $15,000.
"The vast majority of homes in the metro Denver area are in Xcel
Energy electric territory and are eligible for the rebate, which is
based on the amount of energy the system will produce," he says. "The
homeowner can then apply the 30 percent federal tax credit to the
after-rebate system cost, bringing the bottom line to about
$10,000-$11,000."
These incentives may enable homeowners to go beyond switching from coal or gas- powered electricity to solar.
"If you finance the system with a bank loan or Boulder County
ClimateSmart loan, what you're doing is paying off that loan instead of
paying the utility company," Yechout says. "Your net monthly payments
are about the same, but you're getting clean power, and at the end of
the loan, you own the system, and it's all free electricity at that
point" Yechout says.
Even before the loan or system is paid off, solar customers often
start using a lot less electricity, Yechout notes. "They become
conscious of usage and they want that meter to start turning backward."
Municipal role model
The Boulder County ClimateSmart loan offers homeowners and
businesses an innovative way to finance energy-efficiency improvements
and renewable energy systems and to connect to accessible information
about energy rebates and incentives.
"The ClimateSmart loan program provides direct financing for energy
efficiency and renewable energy improvements made to Boulder County
rental properties, as well as for primary residences," says Ann
Livingston, Boulder County Sustainability Coordinator. "The loan shows
up as a special assessment on the homeowner's property tax bill,
although technically it is not a property tax. Similar programs to ours
are being looked at by other cities and counties in Colorado and across
the nation."
ClimateSmart loans are payable over a 15-year period, and the
interest is tax deductible. If the house is sold, this special
assessment stays with the property unless seller and buyer negotiate
otherwise — a major difference between ClimateSmart and private-sector
loans, Livingston says.
"There is a $75 application fee," she says, "but aside from that,
homeowners can borrow the full costs of improvements including solar PV
insulation, windows, and other measures. The only rebates or tax
incentives that we will not cover with the ClimateSmart loan are the
Xcel Solar*Rewards incentives. Homeowners served by Xcel Energy can
gain a significant amount in renewable energy credits and rebates to
help pay for solar PV systems, and not all utilities offer that."
When Julie Herman knew the time had come to make some energy
improvements in her family's 1960s Louisville home, she went with a
ClimateSmart loan. Herman, executive director of the Boulder Green
Building Guild, and a planner and landscape architect, insulated her
attic and crawl space, and installed a tankless hot water heater and
new windows, gaining rebates and tax credits.
"It's important to prioritize; every house is different," Herman
says. "Have an energy audit done first to understand what makes sense.
Depending on the house, new windows alone don't pay you back in energy
savings, so you don't want to limit yourself to installing new windows
if the walls are poorly insulated. Make sure your building envelope is
well-insulated, including the attic, basement and crawl space."
New insulation may not be the sexiest energy-efficient upgrade, but it's one that really counts.
"Nobody will notice when you have your house well-insulated," she
says. "You won't be able to show off, but you won't have to wear a down
coat when you lower the thermostat."