Publication date: 09/11/2009

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Go Green, save some green

This time of year, many homeowners are thinking about making energy-efficient home improvements to help them save money on their energy bills. But you may not realize that you also can qualify for state and federal tax credits, along with rebates from your utility company, for some of these home improvements.

However, finding out what you need to do to qualify can be time-consuming. That's why I am going to help you wade through the maze of tax credits and rebates so you can get all the credit you deserve when making home improvements this fall.

Federal tax credits

As part of the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009, there are federal tax credits available to homeowners who improve their home's energy efficiency.

"A tax credit is actually better for a taxpayer than a tax reduction because it reduces your tax bill on a dollar-for-dollar basis for the amount of the credit, whereas a deduction only reduces the amount of income taxed," says Jonathan Goldberg, an attorney and CPA at Bloom Asset Management in Farmington Hills. "But for most energy-efficient home improvement products, homeowners can only get a maximum credit of up to 30 percent of the qualifying expenditures, with an overall $1,500 limit over the two-year period of 2009 and 2010."

Products that are eligible for a tax credit of up to $1,500 maximum include windows and doors, insulation, roofs, furnaces, boilers, central air conditioners, air-source heat pumps, nonsolar water heaters and biomass stoves. The home must be your principal residence and these credits are not available for new construction.

Tax credits also are available at 30 percent with no upper limit through 2016 for existing homes, new construction and some vacation homes for geothermal heat pumps, solar panels, solar water heaters, small wind energy systems and fuel cells.

In addition to the cost of the products, installation costs are also covered for heating, ventilation and air-conditioning systems, biomass stoves, water heaters, solar panels, geothermal heat pumps, wind energy systems and fuel cells. Installation is not covered for windows, doors, insulation or roofs.

Goldberg also says that you don't have to file an itemized tax return to qualify for the tax credit, but you should make sure you have all your receipts for tax purposes, and would need to fill out IRS Form 5695 to be eligible.

And even if you purchase multiple home-improvement products that could qualify for the tax credit, you can only get a maximum of $1,500 total over the two-year period, not $1,500 per item.

But remember, the tax credits are designed to improve energy efficiency, so the products must meet certain energy efficiency guidelines. For example, exterior windows installed before June 1, 2009 must meet Energy Star criteria, but if they are installed after June 1, 2009, they must have a U-factor of equal to or less than 0.30. A natural gas furnace must have an Annual Fuel Utilization Efficiency (AFUE) rating of equal to or more than 95.

Obviously, the cost for most products with a higher energy efficiency rating usually is higher than a less efficient product, so homeowners will have to determine if the added cost is worth it.

Mike Miller at Family Heating, Cooling and Electrical, (734) 422-8080, www.familyheating.com, says that the 95 percent efficient Amana, Carrier or Comfort Maker furnaces he carries that qualify for the tax credit run between $2,800 and $3,500, which is around $700 more versus an 80 percent efficient furnace.

"For a typical 1,100-square-foot home, a 95 percent efficient furnace is really too large and is meant for a larger home, so homeowners will have to decide if the added cost is worth it just to qualify for the tax credit," Miller says.

Mike Kearns over at Kearns Brothers in Dearborn, (888) 355-6700, www.kearnsbrothers.com, says the tax credit for asphalt roofs is only available for those roof shingles that feature lighter colors that are more reflective, contributing to energy efficiency.

"The roofing shingles we carry that qualify for the tax credit are the Timberline Cool Color Series from GAF, but those only come in limited, lighter colors and cost more, so if a homeowner was to get a $1,500 tax credit, it would mean the energy-efficient shingles would be about the same price as some of the more popular architecturally designed shingles we carry," Kearns says.

For more detailed information on these energy tax credits and energy efficiency guidelines, visit the Department of Energy's Energy Star Web site at www.energystar.gov and click on the link "Tax Credits for Energy Efficiency," or call (888)782-7937.

State of Michigan also offers credits

The State of Michigan is also offering help for homeowners with the Michigan Energy Efficiency/Renewable Energy Tax Credit. To be eligible for the tax credit, there is an income limit of $37,500 for a single earner or $75,000 for a husband and wife filing jointly. The single earner tax credit is $75 or 10 percent of the amount paid for insulation, furnaces, water heaters, windows, refrigerators, clothes washers and dishwashers that meet or exceed the applicable Energy Star energy efficiency guidelines. Husband and wife joint earners would qualify for $150 or 10 percent for the same home improvements.

For more information, visit the Michigan Department of Energy, Labor and Economic Growth Web page at www.michigan.gov/dleg, click on the Energy Systems link and then on New State Tax and Federal Tax Credits, or call (517) 241-6228.

Utilities offer rebates

In addition to the state and federal tax credits, some of our state utilities are offering rebate programs to facilitate more energy efficiency in our homes.

If you are a Detroit Edison or MichCon customer, you may qualify for up to a $350 rebate if you get a home energy audit, which is a great place to start if you want to determine what improvements to make to improve your home's energy efficiency. Detroit Edison and MichCon customers also can take advantage of rebates between $100 and $350 for upgrading your HVAC system, or between $35 and $150 for upgrading by installing an energy efficient water heater. In addition, there is also an appliance recycling program that gives you $50 and free pick-up for a refrigerator or freezer, or $20 to recycle a room air conditioner or dehumidifier. For more information, visit www.dteenergy.com, click on the Residential Customers tab and then click on the Your Energy Savings link.

If you are a Consumers Energy customer, you can get discounts on compact fluorescent light bulbs at participating retailers, and rebates for buying high-efficiency air conditioners, furnaces or water heaters. The rebates can range from $20 for installation of a programmable thermostat to $350 for high efficiency furnace or air conditioner. You also can get a $30 check if you recycle a second refrigerator or freezer, and Consumers Energy will pick up the appliance for free. For more information, visit www.consumersenergy.com and click on the Consumers Energy Savings Solutions tab.

Obviously, before you invest in any home improvements, it is wise to talk with your tax adviser to help determine whether you qualify for a tax credit under the federal or state plans. But with these incentives, coupled with additional funds from your utility company's rebate programs, now is a great time to improve your home's energy efficiency.

Note: This article was accurate at the date of publication. However, information contained in it may have changed. If you plan to use the information contained herein for any purpose, verification of its continued accuracy is your responsibility.

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