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Energy-Efficient Green Tax Incentives to Save Money

Install Energy-Efficient Skylights, Doors, Windows, and HVAC Units

© 2012 by Malia Anderson; All rights reserved; content may not be copied, rewritten, or republished without written permission.

An energy efficient skylight; Photo courtesy Malia Anderson

An energy efficient skylight; Photo courtesy Malia Anderson

This article was updated on 07/28/21.

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It’s no surprise the Federal and State Government agencies have been stepping up their green initiatives for the past decade. Planning on doing some home remodeling? The consumer who takes the extra step to go green is guaranteed to get more tax breaks, although eligibility items change from year to year so check before you buy. Here are some summer projects that will net big tax breaks when it comes time to file your tax return.

One of the easiest ways to net a tax deduction most years is to buy and install a skylight. Proper installation of a green exterior or skylight will usually net a maximum $200 tax deduction (or energy tax credit). But, always check the most recent rules from the IRS.

Don’t Forget to Update Your Homeowners Insurance Policy

If you make any of the energy efficient upgrades mentioned in this article, be sure to contact your homeowners insurance agent. Remember that your policy is meant to cover the replacement cost of your home, not what the tax authorities assess it at.

Upgrade Your Home to Energy-Efficient Windows, HVAC Units, and Doors

Replacement of your home’s windows with energy efficient windows will generally net a homeowner a 10% or $500 tax deduction, with the caveat that during some tax years, geographic location is the determining factor. Don't ask why; these are government mandates. Note that with an energy tax credit, the amount of money returned to the homeowner only applies to the purchase price, not labor installation costs. Letting the sunshine in has never felt so sweet!

Most air that has been heated or cooled that escapes through front and rear doors via thermal transference is due to contractor-grade doors, meaning hollow-core units. This can cause large heating a cooling bills to the owner, as well as increased carbon footprint. We can do better today.

To keep the heating and air-conditioning from working overtime, replace your front and rear door with energy-efficient models. This can equal up to $500 in deductions. To maximize your savings, tackle this as a DIY project, if you are handy. I've provided a how-to on installing a prehung door.

The vast majority of that outrageous energy bill is based on heating and cooling. Sometimes, saving money is as simple as replacing the thermostat with a smart programmable one.

However, for A/C units over twelve years old, replacing the unit altogether with an energy saving appliance can significantly reduce your power bill. The replacement of the central air in a home will net up to $500 or 10% of the installation cost. Just be sure that your contractor determines the proper HVAC size for your home. Messing this up can potentially wipe out your energy savings in the future.

Shop for the Energy Star® Label

Shop for the Energy Star Label; Image courtesy US Gov Save money, make money, and get a deduction? How is this possible? Energy Star® may prove rewarding to anyone who purchases their geothermal heating unit, small wind turbine, or solar panels with a 30% tax deduction(with no amount cap), courtesy of the federal government.

This applies to primary residence homes, so rental units are out of luck with this tax break. Again, government wisdom; go figure. Residences of certain states may also receive a state deduction of up to 30%.

The most remarkable aspect of this is that some energy companies are even purchasing residual energy from clients. This equals a low to non-existent power bill and even the possibility of being paid by the power company. It’s a win-win.

Hydrogen Fuel Cell Boost Home Equity

If the owner has a little more money to spend they can also install a hydrogen fuel cell. This is a revolutionary technology and may change the way homes are powered forever, and it also offers a 30% deduction on income tax. However, as it is an emerging technology, invest with open eyes. We all remember betamax and eight track tapes.

Are you building a new home, or need a complete revamp of your home’s energy system? It might be worth it to you to look into hydrogen fuel cell power system. Uncle Sam will help you to foot the bill by paying for 30% of the cost and up to $500 per .5 kW. In addition to tax benefits, the environmental benefit from fuel cells is unmatched: carbon emissions are reduced by 41% and generate enough excess heat to heat your entire water supply.

There are so many options to make your home greener and more energy-efficient, and the IRS wants to nudge you as gently toward them as possible. Who knew being green could be so profitable?

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About the Author:

Guest author Malia Anderson is a content specialist and freelance author based out of Greensboro, NC. She enjoys pottery, fixing up her first home, and playing the ukelele.

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