Gleaned from another HGTVpro article, here is some great information on Green Rewards and tax credits:
By Stacy and Andrew Hunt
The American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law in February of 2009 and is an economic stimulus package meant to create jobs and jump-start the American economy. As well as providing funding across a number of industries, the ARRA has allocated a significant amount of money for energy conservation and renewable energy production. To help get the nation working towards serious conservation, the bill allocates more than $40 billion to energy-related issues. Some of this funding will specifically address the new and existing housing industry by providing tax credits, rebates, and incentives to home buyers, homeowners and builders.
Builders, remodelers, home owners and home buyers can all take advantage of sizable financial rewards by investing in energy efficiency such as photovoltaics, wind power, solar water heating and more, but only if they understand how the incentives work and how to access them. (It's also worth noting that before beginning an energy upgrade, an energy audit and energy tracking analysis will help determine the most cost-effective places to begin.)
Understanding the expanded tax credits, how to utilize rebates and utilize loan programs, and how to keep abreast of changes at the state and local level -- which may add new incentives as the ARRA is implemented in the upcoming months -- will all help greatly with making informed purchasing decisions.
There are three basic categories of opportunity related to energy-conservation improvements and renewable energy systems in new and existing homes. Those are:
Following is a brief overview of each.
: A tax credit is a sum of money subtracted directly from the tax liability at the end of the year. For consumers, tax credits can be very attractive because the amount of the credit directly reduces the taxes owed to the Federal or state government.
Credits are often confused with tax deductions but there is a significant difference.
A deduction is a sum of money subtracted from the total taxable income. For instance if someone has an annual income of $60 thousand, and qualifies for a $2,000 tax deduction, their taxable income would be reduced to $58 thousand.
A credit on the other hand, is subtracted directly from the tax burden. So for someone earns $60 thousand and is at 10 percent tax rate, their tax burden would be $6,000. A $2,000 tax credit would reduce that amount to $4,000. Tax credits reduce the amount owed on taxes dollar-for-dollar and not just by a percentage.
In 2005 and 2008, tax credits for some energy-efficient improvements were allowed with a limit of $500. The 2009 ARRA has increased the amount to $1,500 and has extended that deadline through 2010 for existing homes and 2016 for new homes. These credits include installing approved Energy Star-rated windows, skylights, and doors, insulation, heating and cooling equipment and certain "cool" roofing materials.
Another major change for home owners is the tax credits available for onsite renewable and low-impact energy systems, such as solar panels and other photovoltaic systems, small wind turbines, and geothermal heat pumps. These systems now have tax credits of 30 percent with no limit on the amount of credit available. This means that builders have an excellent incentive to encourage potential buyers to invest in onsite power generation and existing home owners can save almost a third of the costs on installing these systems. For remodelers, a 30 percent tax credit on equipment can enable home owners to expand projects without expanding their budget.
Home builders are also eligible for a $2,000 tax credit simply by building home that achieve 50 percent energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC). At least 20 percent of these energy savings must come from improvements to the building envelope – the external shell of the building that seals out the weather and seals in a comfortable, efficient and healthy living space. The Energy Star web site provides the required forms for this tax credit as well as more information about funds available to builders of manufactured homes.
: Rebates are funds paid directly to builders and home owners when purchasing equipment or undertaking building improvements.
Unlike tax credits, rebates are generally paid "in cash" after purchase. Rebates are an effective way to stretch home remodeling and new construction dollars because simply by choosing energy efficient products, home owners, builders, and remodelers can save money. Whether it is purchasing a high efficiency laundry set that uses less energy and water, or a programmable thermostat, rebate programs can help offset the costs of normal purchases. There are two primary sources of rebates – manufacturers and utility companies.
Many of Energy Star's product partners provide significant rebates to encourage customers to buy energy efficient products. Rebates are intended to encourage energy conservation, but also to help accelerate adoption of new products in the market. To find out about manufacturer and some utility rebates, visit the The Energy Star web site.
Utility companies often provide rebates on installation of energy saving improvements like insulation, weatherization, and appliances. For example, Austin Energy offers a program designed to help home owners purchase improvements like heat pumps, air conditioners, home weatherization, duct sealing, and insulation.
To find out about utility and other rebate programs in your area, including state, local, utility and federal incentives that promote energy efficiency and renewable energy, visit the Database for State Incentives for Renewables and Efficiency (DSIRE) web site.
The bottom line is that the combination of tax credits, rebates and favorable loan programs provides a significant incentive for people wishing to improve the energy performance of their homes, or invest in renewable energy systems. These investments have the potential to increase green jobs -- the people manufacturing, installing, and maintaining these systems -- and to radically improve our environment, energy and economic security.