Aren’t you getting tired of bad economic news? I know I am. I’ve completely given up the phrase, “Well, at least it can’t get any worse.” Not only that, I’m even getting bored playing Cassandra, and that used to never fail to cheer me up. But here’s some news: My tax rebate check is due to be mailed out by the end of this week, and yippee, I can hardly wait to spend it! I got to thinking, you know what is totally possible here? Double my money! That’s right, I can (nearly) double my money by putting every cent of that rebate into a home energy-saving improvement that qualifies me for a 2008 Energy-Saving Tax Credit.
The limit on the amount of credit the government is currently willing to grant is $500, but that could ( and should) change. Here is what the IRS has to say about it on their own tax credit page:
Energy-Saving Tax Credits
You can take a credit based on what you spend on various energy-saving improvements made to your main home. New energy-efficient improvements qualify, including insulation, exterior windows, exterior doors, water heaters, heat pumps, central air conditioners, furnaces and hot water boilers. The overall credit is limited to $500 and further dollar limits apply to specific components –– for example, $200 for windows. If you took the full $500 credit in 2006, you cannot claim the credit in 2007, even if you made qualifying energy-saving improvements.
Separately, there is a 30 percent credit for the cost of photovoltaic property, solar water heating property and fuel cell property.
These credits are claimed on Form 5695.
Tax credits are different from tax deductions. A tax credit comes directly off of the tax you owe, not off your taxable income like a deduction does. That doesn’t mean that if you usually get a refund a tax credit is useless to you; what it might mean is that with the tax credit your refund will be much larger.
Different home energy improvements qualify for different tax credit amounts. Here are some eligible improvements:
Below is a table of anticipated tax savings and energy savings for energy-efficient home improvements taken directly from the Department of Energy website:
Tax Credit Specification
|Windows||Exterior Windows||Meet 2000 IECC & Amendments||10% of cost not to exceed $200 total|
|Skylights||Meet 2000 IECC & Amendments||10% of cost not to exceed $200 total|
|Exterior Doors||Meet 2000 IECC & Amendments||10% of cost not to exceed $500 total|
|Roofing||Metal Roofs||ENERGY STAR® qualified||10% of cost not to exceed $500 total|
|Insulation||Insulation||Meet 2000 IECC & Amendments||10% of cost not to exceed $500 total|
|HVAC||Central AC||EER 12.5/SEER 15 split Systems EER 12/SEER 14 package systems||$300|
|Air source heat pumps||HSPF 9 EER 13 SEER 15||$300|
|Geothermal heat pump||EER 14.1 COP 3.3 closed loop
EER 16.2 COP 3.6 open loop
EER 15 COP 3.5 direct expansion
|Gas, oil, propane water heater||Energy Factor 0.80||$300|
|Electric heat pump water heater||Energy Factor 2.0||$300|
|Gas, oil, propane furnace or hot water boiler||AFUE 95||$150|
|Advanced main air circulating fan||No more than 2% of furnace total energy use||$50|
* Source: ENERGYSTAR.gov
** The IRS will determine final tax credit amounts. As more information becomes available, it will be posted on our web site.
Although using a tax rebate check to get another tax credit is not very sexy, financially it’s the bomb. Not only do you get semi-immediate gratification in the form of a chunk of change coming right off your 2008 tax bill, you also get the energy cost savings of the improvements themselves for the rest of 2008 and for as long as your energy-saving improvements last beyond that.
Once you get done patting yourself on the back for being so financially savvy, write your congresspeople, because what they are doing right now, at this very minute, is letting many of these credits expire while they argue about pork projects and creating new holidays and whether baseball players should use steroids and whether gay people should marry each other and lots and lots of other idiotic nonsense that won’t do one single thing to make life better for 99.9% of us.
Imagine what would happen if these energy-saving tax credits were radically expanded so as to make energy self-sufficiency an attainable goal for every American household? Excellent technology already exists in photovoltaics and personal wind turbines, not to mention biodiesel for both home heating and auto fuel. The problem is that much of this technology is prohibitively expensive to purchase and install.
The US government could instantly create millions of new manufacturing jobs in this country by increasing energy tax credits for builders and individuals, and by underwriting low cost loans for energy overhauls that would make each household energy self-reliant. Not only is this possible, some European nations have already implemented such programs with great success. It goes without saying that energy self-reliance for US homes would also go a long way towards freeing the US up from life-and-money-sucking foreign entanglements over petroleum, and in doing so would provide money for, I don’t know, health care maybe?
I’m off now to research affordable ways to heat our home this winter. I’ll be sure to post what I find out so if you want to live in a warm space come November of 2008 too, you’ll have a few choices for how to accomplish that seemingly impossible goal. In the meantime, plant that Victory Garden, walk to work, recycle, and smile if you can!
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