Get Cash Back for Energy-Saving Upgrades
The Feds will give you a tax credit for making your home more efficient. Learn which projects pay off most
We know, we know: The economy's iffy, jobs are tight, housing values aren't what they once were. But if there were ever a perfect time to invest in your place by adding more insulation or replacing a creaky old water heater, it's now. The economic stimulus package passed by Congress last February included a federal tax credit—not just a deduction, but a full-on credit—of 30 percent of the cost of all sorts of energy-saving systems, with a cap of $1,500 per house, if installed by the end of 2010. These upgrades pack the double benefit of slashing your utility bills while increasing your house's long-term value, too.
You probably don't need all these upgrades, but chances are you'll benefit from one or two. Our guide will help you figure out which ones give you the best bang for your buck.
You'll pay: Anywhere from a few hundred bucks for enough batting for the attic to several thousand for a whole-house upgrade.
You'll save: Up to 15 to 25 percent on heating and cooling.
Why do it now? "Virtually every home needs more insulation," says Paul Scheckel, a senior analyst with the Vermont Energy Investment Corporation and author of The Home Energy Diet.
If the batting in your attic is less than a foot thick, you'll benefit by adding more.
What to look for: Qualified products must meet standards established in the 2009 International Energy Conservation Code. Healthier home options include formaldehyde-free fiberglass batts and cellulose-based spray foam that fills nooks and crannies.
Bottom line: Insulation, when paired with sealing air leaks, is probably the most-bang-for-the-buck of all efficiency measures. Even without the credit, your payback period may be as little as a year or two. Many state governments and utilities offer incentives, too—in some cases rebates of up to $750.
You'll pay: Qualified double-hung windows start about $200 per window; doors start
You'll save: Up to 20 to 30 percent on heating and cooling.
Why do it now? More often than not, drafty old windows and doors can be made airtight by weatherstripping. But if yours are in truly bad shape, or if your windows aren't double-paned, the credit is a good incentive for installing the most efficient models you can afford. "This is your one chance to really do it right," says Scheckel. Qualified products don't cost a whole lot more than less efficient ones, and you'll reap the benefits for years.
What to look for: Tougher efficiency standards went into effect in June 2009, so some Energy Star-labeled products may no longer qualify. Look for products with low-emissivity or "low-E" coatings, which keep heat in during the winter and out during the summer. Also consider doors with foam cores and double-paned windows filled with nontoxic gas, like argon or krypton, which increases their efficiency. Andersen's EcoExcel line of products has several good qualifying models, but the best choice depends on your climate and house; an auditor can walk you through all the options.
Bottom line: Replacement windows and doors should come after insulating and sealing air leaks but can still be a good move to shore up long-term savings and value.
You'll pay: Aluminum double-track interior storm windows start about $40 each; basic doors are a few hundred. Qualified exterior storm windows, often used for historic windows, are about $100 each.
You'll save: As much as 15 to 20 percent on heating and cooling, especially in cold climates.
Why do it now? For historic homes, where replacement windows or new doors might give an owner pause, storms go a long way toward improving efficiency and comfort. Exterior storm windows can also help seal out moisture and protect wooden sash.
What to look for: Requirements for qualifying products vary for different windows and regions. Many storms are now made with low-E coatings, like exterior windows, and double-track windows are available with enamel coatings, which are easier to slide up and down than aluminum ones.
Bottom line: If you lack the bucks for new windows or want to preserve the originals, storms are an excellent intermediate measure.
You'll pay: Qualified models start about $2,000.
You'll save: Up to 50 percent on water heating costs.
Why do it now? The more people you have living at home, the more an efficient water heater will save you dough. Qualified models use about only half the energy as nonqualified models, so you'll start seeing the difference right away. And, in this case, the credit covers installation costs. If your heater is more than 10 years old, it might be time to replace it; rust or corrosion on the exterior can be clues to its condition.
What to look for: Tankless models heat water only as you need it, making them more efficient than traditional ones. GE Navien, and Rheem are introducing tank-style heaters that supplement electric or gas heating with an air-source heat pump; both companies say their devices cut water heating costs by up to 50 percent.
Bottom line: By and large, qualified heaters are pricier than standard models, but the credit helps defray that cost. Just don't waste money on a bigger one than you need. "If you've
got a small electric water heater in good condition and you live alone, it might not be worth it to upgrade now," says Scheckel.
You'll pay: About $2,500 to $3,500 for asphalt shingles, including labor; metal costs about $5,000
You'll save: Up to 10 to 20 percent on cooling.
Why do it now? In hot climates, a cooling roof, made of reflective material that won't absorb the sun's heat, can lower indoor temps dramatically, in some cases cutting your need for air-conditioning in half. Metal roofs (which comprise most of the products eligible for the credit) are pricier than most roofing materials but can last up to 50 years. They're also much more fire-resistant than asphalt shingles, something to keep in mind if you live in an area prone to wildfires.
What to look for: The credit is available for Energy Star–rated reflective asphalt and metal roofs but not roof coatings. Qualified asphalt shingles, once available only in white, now come in colors that mimic the tones of wood and slate; manufacturers include ArmorLite and CertainTeed.
Bottom line: A cooling roof is a major investment but a smart one if you live in a hot climate and need a new roof anyhow.
You'll pay: Efficient cord wood stoves start about $1,700; pellet stoves are $3,000 to $4,000.
You'll save: 30 to 50 percent on heating.
Why do it now? Heating with pellets or cord wood is cheaper than using oil or electricity at current rates. (Annual fuel costs are about $300 to $600 for a stove used as a primary heat source, roughly on par with natural gas.) Some models require a new chimney, which can add a few thousand bucks to your initial cost, says Scheckel.
What to look for: Qualified stoves, like Hearthstone's cord wood models, are pricier than the old-school pot-bellied kind but are much more efficient. Opt for one that uses fuel that's readily available where you live.
Bottom line: A stove won't pay off if you heat with natural gas. But if you use oil or electricity, you'll save by supplementing with or switching to a stove or insert.
Read the Fine Print
Only the most efficient products and systems qualify for the tax credit, and not all Energy Star–labeled products make the cut. And, with a few exceptions, the cost of labor is not included. Look for a chart that lists all the details and links to qualifying products at Energy Star. Your tax preparer or installer can also help you determine which products fit the bill.
Get an Energy Audit
You'll pay no more than a few hundred bucks, and some utility companies even provide one free. An auditor will pinpoint your home's trouble spots and crunch the numbers on fuel costs so that you'll know which upgrades will pay off. In many cases, auditors can also help you identify local rebates and incentives you're eligible for. Find an auditor through your local Home Performance with Energy Star program or the Building Performance Institute before you buy.
Stop Drafts and Seal Air Leaks
"It doesn't make sense to spend money on upgrades if your house is leaky," says Rob Moody, a LEED instructor for the U.S. Green Building Council and consultant at Organic Think in Asheville, North Carolina. Seal gaps with weatherstripping, spray foam, or caulk. You may qualify for help through the federal Weatherization Assistance Program, which has provided efficiency upgrades like sealing air leaks free of charge for some 6.2 million low-income families. To find out if you're eligible, call the program hotline at 800-363-3732.
The tax credit is even more generous for solar panels and geothermal HVAC systems, or newer technologies like wind energy and fuel cells. You'll get a 30 percent credit, with no upper limit and including installation, through 2016. "If you live out West, you might consider solar," says Jennifer Schwab, director of sustainability for Sierra Club Green Home; local rebates, lease-to-own deals, and monthly payment plans are making the investment more affordable. Geothermal systems cost $15,000 to $20,000 to install, but they have low operating costs, so you can recoup your investment in as little as four years if you're switching from electric heating and cooling (or about 12 years for natural gas). ClimateMaster is one brand to look for.
For newer technologies, the situation's a bit different. The payback for wind energy is highly variable—ranging from six to 30 years, Schwab says—and most turbines need a half-acre of land and wind speeds averaging 10 miles an hour or higher to create electricity. (EarthTronics recently introduced one that works at speeds as low as 2 mph, but few have been installed to date.) And not many options exist for the homeowner who wants to install fuel cells to make electricity. But stay tuned on how these technologies evolve—the credit is good for several more years.