Established by the Energy Policy Act from 2005, the tax incentive for energy efficient home improvements initially focused on the use of solar systems for water heating and electricity production. Today, households can make use of a few more possibilities that qualify for an energy efficient home tax incentive.
Whether you are looking for an energy efficient new homes tax incentive or you are planning improvements in the property that you already own and live in, there are several key features you need to be aware of before getting started.
Basic Energy Efficient Home Tax Incentive Requirements
To qualify for this type of energy efficient home incentive, you will need to purchase and install any kind of equipment that is qualifying for the program. The equipment should remain installed in the property for a period of at least five years.
Keep in mind that the requirements for this kind of tax incentive change on an annual basis. The conditions for 2014, for example, applied to all kinds of energy efficiency and home sustainability improvements that were completed during 2013.
Efficiency improvements in the building envelope of existing property, the purchase of high efficiency water heating equipment, as well as the purchase of high efficiency home heating and cooling equipment all qualify for the tax incentive.
Types of Home Improvements that Qualify
Now that you understand the basic requirements of qualifying for an energy efficient home tax incentive, it is time to take an in-depth look at the type of equipment that you can purchase for the purpose.
When it comes to building envelope improvements for existing homes, you need to focus on insulation projects that reduce the heating and cooling costs. Modernization of the exterior doors and windows, as well as the installation of pigmented metal roofs will also qualify for the energy efficient home incentive.
You can also look for energy efficient home heating and cooling equipment or water heating equipment. Apart from reducing your electricity bills significantly, this kind of improvement will also qualify you for a tax incentive.
Some types of equipment you should consider purchasing for your home include:
- An electric heat pump water heater (it should have energy factor of at least 2.0)
- Biomass stoves
- Natural gas or propane furnace/water boiler (that has annual fuel utilization of 95 or more)
- Natural gas or propane water heater that has thermal efficiency of 90 percent or more
- Central air conditioners
- Advanced main air circulating fans
A Few Additional Tips
When thinking about such improvements, calculate the amount of money you will be saving on utility bills. This aspect of purchasing energy efficiency equipment is even more important than qualifying for an energy efficient home tax incentive.
All of the equipment should have been purchased and installed during the previous year. You will otherwise fail qualifying for the incentives when you file your taxes.
You can also look for rebates. There are various kinds of financial incentives that go beyond tax incentives. Acquaint yourself with the possibilities in advance and make careful plans on the basis of the preliminary calculations.
Steve Nanos
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