Green Energy Tax Credits And Home Efficiency
Along with increased awareness of climate change, more and more people across the planet are expressing a desire to make a change for the better in their lifestyles to reduce their carbon output and attempt to fight against the rising global temperature.
However, home improvements that actually reduce your carbon footprint are oftentimes expensive to make. Most people either can’t afford to make drastic home upgrades or see no incentive to do so. Here are eight tax credits you can receive, at least until the end of 2021, simply for reducing the carbon output of your home.
If you upgrade to solar-powered electricity by 2022, you’ll qualify for a tax credit equal to 26% of the cost to purchase and install it. Just make sure to have it installed by the end of that year, as the credit will decrease and ultimately expire in the years following it. It also doesn’t matter if you’re adding it to a new house or an old one – the credit is applicable to both.
The solar-powered generators, including solar panels and solar water heaters, must be certified to meet government standards and generate at least half the energy of the property. There is also a slew of other incentives to reduce the costs of these installations in an attempt to encourage more Americans to adopt them.
If you live in a rural (or even sparsely suburban) area, compact wind turbines may look ideal to you either in addition to or separately from, solar panels. Similar to solar power, there are plenty of incentives to take advantage of to reduce the costs of installation in addition to the tax breaks.
Not to mention the fact that you’re helping to save the world, of course. Small, residential wind turbines qualify for a tax break equal to 22% of the cost to purchase and install it through the end of 2021. Of course, this could be extended, but it hasn’t been as of yet.
While solar energy comes from the sun and wind energy comes from wind, geothermal energy comes from the heat that’s generated inside the planet itself. Although more expensive to install than solar panels or wind turbines, they use 25-50% less electricity than your average furnace or air conditioner.
This can lead to saving you considerable money on electricity bills each month and eventually paying itself off – along with, of course, the qualifying incentives and tax breaks you’ll receive from installing one, which equals 22% of the cost to purchase and install it.
Fuel Cell Energy
Although much more expensive than the other types of energy generation, fuel cell systems simultaneously generate heat for both water systems and the home itself, as well as electricity, from a single unit. They run off of biofuels, which are organic, renewable materials, and can continue to operate during blackouts, poor weather, and cloudy days, making for a truly reliable off-the-grid experience.
However, the tax credit on these is the same as all the other types of green energy systems (22%) until the end of 2021. Along with all the other types of green energy, these can be installed within new or existing homes, provided they are primary residences and not rental properties.
The “Energy Efficient Mortgage Program” (EEM), started by the Federal Housing Administration, will ensure the entire amount of all your green energy home updates in addition to any loan you take out for a new purchase, refinance, or 203k.
This means that you may qualify for a much larger loan than you would ordinarily have gotten, provided those extra funds go to green energy home improvements.
However, to qualify, you must get a professional “home energy assessment,” which will then make recommendations for how much the upgrades will cost. Additionally, unlike the other pre-stated tax credits, this budget is not unlimited and is not set to expire within the next year or 2-3 years.
Non-Federal Tax Credits
In addition to federal tax credits for the obvious green energy initiatives stated above, several state and local governments will offer financial incentives to people who invest in energy-efficient upgrades. These may be in addition to the federal tax credits, or they may be for other initiatives that don’t qualify for federal funding.
For example, Pennsylvania offers a $500 rebate for the installation of a solar-powered water heater installed by a licensed contractor. In other places, cities, towns, and even utility companies offer rebates on the installation of energy-efficient appliances or heating and cooling systems.
It helps to do research on your place of residence so that you can get the biggest overall savings on your energy upgrades.
Other Potential Green Energy Upgrades
If you have the money to conduct energy efficiency upgrades without federal, state or local financing, that’s great. There are plenty of other potential green energy upgrades that you can purchase and install that don’t qualify for federal funding but can still help the planet.
These may include heat pumps, biomass stoves, water heaters powered by natural gas or electric water heaters, or even making improvements to specific parts of your home to limit the amount you’ll have to spend on your energy bill (such as frequently replacing windows, doors, and insulation to provide the highest-level efficiency).
Although many of these credits will expire at the end of the coming year, that means that now is the time to make these home updates. As climate change rapidly devours our planet, it’s important not to wait anyway. However, there is a high chance that Congress will choose to extend it beyond 2021 anyway, as climate change becomes more pressing and further changes will become more and more imperative to make.
With plenty of options available, as well as financing incentives, there are not too many excuses to be made anymore when it comes to making the switch to green energy.