A few months back, just when the Washington, D.C., heat was approaching its peak, the central air conditioning in our house conked out. After a week of short-term "fixes," we concluded that we needed to shell out a few thousand dollars for a new unit. By this time, our family was very hot, cranky, and impatient (spoiled, I know).
As a family, we're typically pretty good at doing our due diligence as consumers. But the heat must have pickled our brains because we bought the unit our air conditioner technician recommended, few questions asked. We shouldn't have.
Here's my post-purchase, nagging revelation: Our air conditioner isn't particularly energy efficient. At least, it's not energy efficient enough to meet the Consortium for Energy Efficiency's high standards (which are even higher than the federal standards enacted in January 2006), meaning no federal tax credit for us come next April. Over the long haul, this mistake will cost us in terms of energy bills, and tax savings -- and in the knowledge that we didn't do our part to help the environment.
Don't make the same mistake. Familiarize yourself with which energy-efficient home improvements yield tax savings -- as well as big savings on your heating and cooling bills -- as detailed in the list below:
- Batten down the hatches.
- Replace exterior windows (including storm windows and skylights) and 10% of the cost (up to $200) may count toward your $500 total credit. All Energy Star windows meet the necessary standards.
- Replace exterior doors (including storm doors) and deduct 10% of the cost of the door plus the cost of the sealant (caulk, weather stripping, or foam) used to minimize air leakage. You cannot deduct anything for the installation.
- Insulate your home to the official standards established for your region. Check the Department of Energy's cheat sheet on insulation.
- Replace your roof with a pigmented metal roof that meets Energy Star requirements. You can deduct 10% of the product's cost (up to $500); no deduction for installation.
- Update your home's heating or cooling systems.
- Replace your central air conditioning unit, water heater, or heat pump and deduct up to $300 of the product's cost and installation.
- Replace your furnace (and/or its efficient air-circulating fan) or boiler. Save up to $150 of the purchase price plus installation for the whole enchilada; just $50 for the cost and installation of the furnace fan.
Note that the maximum tax credit you claim in any given year for the above items cannot exceed $500 (no more than $200 of which can be for windows).
Even more eager to go green? The IRS will also give you tax credits for installing qualified solar panels, solar water heating equipment, or a fuel cell power plant in your home. (Not so fast to the hedonists among you -- the costs don't count if you're using the solar power for your hot tub or pool). See the IRS' guidelines regarding energy-related tax credits for non-businesses for a full description of rules and benefits.
Want to find out more ways to save on your home? Try:
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Fool contributor Elizabeth Brokamp is a licensed professional counselor who regularly talks money with her honey, Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter. The Fool has a disclosure policy.