Does It Pay to Remodel? If It’s Energy-Efficient, Yes

The Energy Star logo is placed on energy-effic...
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Back in the time of the “bubble” when it was easy to get money from your equity line of credit, home construction projects made sense.  The home’s value was appreciating by the minute. Adding a few upgrades,  new kitchen cabinets here, some granite counters there, all seemed perfectly reasonable because the money spent would defintely come back to you in the form of greater value.

That was then. This is now.  Does it still make sense to remodel?  In the present real estate market, the answer is all about improving energy efficiency.  If you’re looking to become more energy-efficient, and who isn’t these days, it’s a great time. Because tucked into some of that much-ballyhooed legislation to help home buyers, are some important tax credits to help home owners make their homes more energy-efficient.

If you are serious about making your home more energy-efficient, you can now get tax credits worth up to 30% of the value of  the item, and a $1500 lifetime credit. The tax credit is retroactive to January 1, 2009 for improvements made through the end of 2010 and for some through 2016. Notice this is not a tax deduction, but a tax credit so it eliminates any tax you owe dollar for dollar.

And, what might be these energy-efficient items? Some energy-efficient improvements are eligible for installation and materials cost credits, such as for HVAC [air-conditioning] systems, solar water heaters, solar panels, geothermal heat pumps, wind-energy systems and fuel cells.   Some components are covered only for the cost of the material. This group includes sliding patio and French doors, meeting certain criteria, though windows do not.

Some appliances are also eligible for the credit. Especially if your appliances are more than 15 years old, 10 in some cases, it really pays to change them for new Energy-Star ones. It’s estimated that a household spending about $2000 per year on energy would save about $700 per year in costs. That’s not counting the tax break. Not all appliances are eligible, but the most energy-efficient usually are. Check out this website for all eligible products.

If you purchase any of these items, you will need IRS Form 5695 available at the IRS website.

Notice also that Southern California Gas is offering rebate for purchases of tankless water heaters of up to $200 depending on the model as well as furnaces and a number of other items.  The DWP [Department of Water and Power] is offering terrific deals on electric lawn mowers for those willing to trade their old gas-guzzlers. And, it will also give rebates for new clothes washers.

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