The popularity of solar equipment is growing all the time, particularly in areas that see a big number of sunny days per year. Apart from providing an opportunity for green energy production, solar panels can also be used for energy efficient water heating.

The execution of such projects delivers a vast range of benefits going beyond the energy efficient home credit. Here are some of the most important advantages to consider.

Diminished Use of Energy

Conventional water heaters need a lot of energy, which can add up to a large annual amount. According to the Solar Energy Laboratory at the University of Wisconsin, a four-member family consumes 6,400 kilowatt hours of electricity per year for water heating.

Solar equipment reduces that significant amount. In addition, it will reduce the carbon footprint of water heating. The conventional electric water heater is responsible for eight tons of carbon dioxide emissions per year. It’s easy to see how the use of solar equipment is both cost-efficient and environment-friendly.

The cost-effectiveness of such systems will depend on location and the number of sunny days per year. These factors have to be taken in consideration, if you’re considering this possibility for getting access to an energy efficient home credit.

Reduced Cost of Equipment

Photovoltaics used to be very costly a couple of years ago. Today, the technology is readily accessible and more affordable than ever.

A residential solar water heating system will range in cost from 1,500 to 3,500 dollars, depending on its size and the water heating needs of the household. In this sense, electric and gas heaters are much less expensive.

The electricity savings that solar water heating produces, however, will bring a great return on investment. Depending on the location and the use of the system, solar water heaters will pay themselves off in four to eight years. The lifespan of such equipment ranges from 15 to 30 years, which makes it one of the most affordable options on the market.

A Few Shortcomings to Keep in Mind

Solar water heating is a great possibility if you’re interested in obtaining an energy efficient home credit but it’s far from a universal solution. There are a few shortcomings and limitations to consider in advance.

Many areas that see a cold and snowy winter will require the selection of a backup water heating system. Photovoltaic systems are not reliable 365 days per year. Fuel or gas backups are the most commonly selected options.

The solar panels have to be protected against low temperature and freezing. Thus, you’ll need to keep wintertime maintenance in consideration.

Finally, a tank will be required for water collection. This tank could get quite heated during the summer days. Choosing the right location for its placement will be essential.

The execution of such projects will qualify you for an energy efficient home credit in the period until the end of 2016. You can claim a credit of up to 30 percent of the equipment’s cost. On-site preparation, assembly and labor costs are included in the calculation. Do your research and make sure you understand the possibilities before picking solar water heating or another type of green technology for your home.

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The Importance of Energy Efficient Building Envelope

Outdated building envelope solutions lead to significant heat loss, which decreases the energy efficiency of the building.

Residential and commercial buildings add up to almost 40 percent of the US energy consumption. Most of the energy is dedicated to heating and cooling. The loss of heat results in additional energy use, higher utility bills and an increased carbon footprint.

The building envelope acts as a barrier between the inside of the building and the external environment. Many innovative solutions (like the use of modern insulation materials) boost the energy efficiency of the envelope and give access to financial stimuli like an energy efficient home credit.

Benefits of Building Envelope Improvements

Building envelope improvements increase the attractiveness of both residential buildings and office/commercial spaces. There are several main reasons why investors are increasingly demonstrating interest in higher building envelope energy efficiency.

Poor building envelope design could contribute to anywhere between 30 and 50 percent of the electricity bill due to the loss of heat. A “leaky” building is very expensive to maintain and the comfort level is low.

Contemporary building envelope solutions improve air quality and facilitate moisture management. Modern construction projects usually feature efficient ventilation systems alongside the building envelope improvements. These two factors contribute to the already mentioned benefits.

Improving Energy Efficiency

It’s relatively easy to improve energy efficiency through the selection of the right building envelope design. Responsible architects and engineers know how to correct air leakage problems in existing buildings and how to boost the energy efficiency of new constructions.

Building envelope modifications and projects that give access to an energy efficient home credit could be any of the following:

• The use of passive solar heating
• The selection of the right building envelope materials
• The strategic addition of insulation to the building envelope
• The selection of the right roof design and materials
• The strategic placement of doors and windows to minimize heat loss.

The Cost of Building Envelope Improvements

Calculating the building envelope design and execution costs in advance will help you figure out whether the project is going to bring the expected return on investment.

Keeping the amount of money that’s going to be saved through such projects in mind will be great for budget planning. The installation of an Energy Star window, for example, can save anywhere between 125 and 465 dollars per year on electricity for heating and cooling.

The addition of insulation to a residential building will decrease utility bills by nearly 12 percent, the Center for Climate and Energy Solutions reports.

Don’t forget that building envelope projects will also give you access to an energy efficient home credit. This financial stimulus decreases the cost of execution further and boosts the attractiveness of investment in energy efficient solutions.

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The energy efficient home credit is one of the popular possibilities for lowering the tax amount. It’s not the only possibility out there and the following article will acquaint you with the types of projects you can execute and benefit from a tax decrease.

The Non-Business Energy Property Credit

The non-business energy property credit expired in December 2013. You still may claim that credit for improvements executed until the end of its duration, if you haven’t reached the lifetime credit limit in the previous years.

The credit you get totals 10 percent of the value of energy efficient purchases you have made for residential property. Insulation, energy efficient windows, doors and roof improvements all qualify for the non-business energy property credit.

A credit could also be available for the purchase of water heaters and air conditioning systems. The amount is different for each type of item and could reach up to 100 percent of the value. The maximum lifetime limit of this credit is 500 dollars and it applies to improvements made in a primary US residence.

In order to benefit from the credit, you need certification from the manufacturer that proves a particular item corresponds to energy efficiency requirements. The certification should be kept with your tax records rather than attached to your return.

The Residential Energy Efficiency Property Credit

This energy efficient home credit is valid until the end of 2016.

This energy efficient home credit totals 30 percent of the value of qualifying equipment. Unlike the non-business energy property credit, this one applies to installations in a primary residence, a secondary residence or a vacation home.

Solar water heating systems, solar energy production property, wind energy production property, geothermal heat pumps and fuel cells will all qualify you for the residential energy efficiency property credit.

For most types of property, there is no dollar limit to the credit amount. The credit can be carried forward to the coming years, if its amount exceeds the taxes that you owe.

How to Get a Tax Credit

Getting a tax credit is a relatively simple task and the IRS website contains a lot of detailed information.

To claim any of these two credits, you need to use Form 5695. The form contains information about the type of energy efficient equipment you’ve installed on your property, its cost and the amount of credit you’ll benefit from.

This FAQ section on the IRS website provides additional information about energy efficient home credits and how to claim them.

If you’ve invested in energy efficient improvements during 2013 and 2014, you can easily decrease the amount of taxes you owe. Energy efficiency is starting to play a pivotal role in today’s economic climate. Chances are that incentives for homeowners will continue being provided in the years to come – plan home improvements accordingly to benefit from such stimuli.

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Wondering what kind of technology to invest in? Here are four of the best residential improvements targeting the property’s energy efficiency.

Ground Source Heat Pump Installations

This project will qualify your residential property for an energy efficient home credit and in addition, such systems happen to be one of the best options for decreasing heating and cooling expenses.

A ground source heat pump relies on geothermal energy – the heat generated by the Earth. There seem to be numerous misunderstandings about this installation and many people believe that the proximity of a hot spring is needed for a geothermal installation to become a viable option. Geothermal energy can be used in any part of the US for residential property heating and cooling.

The efficiency of a geothermal system can exceed 400 percent and every 100,000 homes relying on a ground source heat pump system reduce electricity consumption by 799 million kilowatt hours on an annual basis.

Energy Star Products

Products coming with Energy Star certification will bring a tremendous return on investment because they will result in significant electricity bill reductions.

Energy Star certification is available for more than 60 different product categories. A few light bulbs and fixtures can be an excellent start, in case you lack the funds to invest in more expensive items.

When it comes to Energy Star products, you can choose among common household appliances, electronics, water heating equipment and even office machines like printers, faxes and computers.

Energy Efficient Water Heating Systems

Traditional water heating can add anywhere between 490 and 530 dollars per year to your electricity bill because it accounts for almost 25 percent of a household’s energy consumption. Opting for an alternative form of water heating will help you save a lot of money and also enable you to qualify for an energy efficient home credit.

Solar water heaters are designed to provide hot water most of the year. The location and number of sunny days per year will be determining for the efficiency of the installation. Such systems cost anywhere between 1,500 and 3,500 dollars. The electricity savings produced by solar water heaters will make them pay for themselves within four years.

Fuel Cells

This innovative technology is another great option for reducing heating and cooling expenditure.

The system converts stored fuel into either heat or electricity. A fuel cell system can reduce a household’s carbon footprint significantly.

There is one problem with fuel cells that residential investors experience – such systems are still quite costly. Typical fuel cells cost approximately 50,000 dollars. An energy efficient home credit is available. You can take a credit of 30 percent of the system’s value (including installation expenditure). It’s also important to keep in mind that residential fuel cells can lower electricity consumption by up to 50 percent, thus the system has a relatively high return on investment.

An energy efficient home improvement can be executed, even if you can dedicate a small budget to this kind of project. Think about the energy saving that the system will produce, especially if you want to get the best possible return on investment.

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How does the Residential Energy Efficient Property Credit Work?

An energy efficient home credit will be provided for improvements completed during the past year. The term of the program is until December 31, 2016.

The residential energy efficient property credit will cover 30 percent of the cost of qualifying energy equipment. This equipment could have been installed on a property that you currently live in or on a vacation home. The same rule applies to new residential projects.

The amount of credit is unlimited for most kinds of residential property. Credit that exceeds the sum owed in taxes can be transferred to the coming year. It’s yet to be seen whether the rule will remain valid after the end of 2016.

Qualifying Projects

You can execute several different residential property improvements in order to qualify for an energy efficient home credit.

The project varieties that you can consider executing include:

• Geothermal heat pumps
• Solar water heating systems or solar electricity production
• Small wind turbine systems
• Fuel cell systems

Only fuel cells need to be installed in the primary residence to qualify for an energy efficient home credit. All other projects can be executed on the primary residence, a vacation property or a second home.

More information about the requirements for each product and the qualification criteria is available at the Energy Star Website.

Alternatives

In the past, homeowners had an alternative option in terms of claiming an energy efficient home credit. The option was called the Nonbusiness Energy Property Credit but it expired in the end of 2013.

This program applies to all home improvements executed in 2013 and the prior years. It provided tax credit of up to 10 percent of the price of all qualifying products. This type of credit came with a 500-dollar limit for all kinds of energy efficient home improvements.

In order to qualify for this expired opportunity, you must have purchased and installed energy efficient equipment on your residential property in 2013 or the years before. The program applied solely to existing homes rather than new constructions.

This program included home improvements like:

• Biomass stoves
• Central air conditioning systems
• Gas, propane or oil hot water boilers and furnaces
• Energy-efficient door and window installation
• Energy-efficient skylights
• Insulation
• Energy-efficient roofing installation

Going for energy efficient home improvements will deliver a quick return on investment because of the saving on utility bills you’re going to achieve and the available financial stimuli. Though several programs have already expired, you still have possibilities for tax reduction through residential property improvements. Think about the most practical energy efficient project before getting started and do your calculations in advance. Preliminary research will enable you to save a lot of money in the long run and it will also lead to lucrative tax reductions.

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Photo Credit: iStock Photo

Legislative changes have made many home owners and investors think about the projects and sustainability improvements that still qualify for energy efficiency incentives. The execution of small wind energy property projects is one of the possibilities that still qualify for financial compensation.

Wind-Based Energy Production and Incentives

The residential energy efficient property incentive is going to be available for projects executed until 2016. Some of the qualifying projects include small wind systems, solar panel installation, fuel cells, solar water heating systems and geothermal heat pump systems.

Individuals that execute such projects can claim 30 percent of the cost of the alternative energy equipment. The energy efficient home incentive comes with no dollar limit for the majority of residential property types.

If the energy efficient incentive exceeds the amount owed in taxes, the leftover can be carried forward to the returns for the coming year.

Additional Benefits of Wind-Based Alternative Energy Systems

Apart from giving access to financial stimuli like the energy efficient home incentive, the installation of a small wind energy system is connected to a vast range of additional benefits.

Wind energy technology comes with enormous potential. Such installations are very space efficient and the price of installation has decreased by almost 80 percent since the 1980s. The technology is expected to become even more accessible in the years to come, which will decrease the price even further.

The operational costs associated with energy production from wind are quite low in comparison to the amounts needed in the case of other alternative energy systems.

The mounting method and the size of the wind energy system for residential purposes will be determining for the cost of the installation. Turbines mounted on buildings tend to be less expensive than pole-mounted equipment. There are options to choose among, which increases the versatility and practicality of such installations.

Is the Project Right for You?

Several factors need to be examined before you decide whether a small wind energy project is the right sustainable development for your residential property.

The wind speed is the first factor to be examined. In order to get sufficient return on investment, you need ample and consistent wind. Power will be produced if the speed of the wind exceeds seven miles per hour. The best performance is obtained at wind speed ranging between 12 and 20 miles per hour.

Local zoning regulations will have to be examined, as well. Sometimes, the installation may violate height restrictions. Keep in mind that wind systems require enough space and the smallest installations will need approximately half an acre.

When buying equipment, you’ll need to have a good idea about the right turbine size, the height and the durability of materials. Quality turbines require very little maintenance and they’ll remain in good condition for at least 20 years.

Apart from giving you access to an energy efficient home incentive, a wind turbine installation will provide convenience and a great return on investment. Do your preliminary research to make sure this sustainability project is the right one for you and that execution’s going to be easy on the particular plot you’ve chosen.

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Making energy efficient improvements, however, could be a costly endeavor. Several kinds of projects will give you access to an energy efficient home incentive. This kind of financial stimulus could make it a lot easier for you to invest in such equipment.

Residential Energy Efficiency Property Incentive Overview

This type of residential energy efficiency incentive will be available through 2016. Homeowners that invest in energy efficiency improvements can claim up to 30 percent of the cost of qualifying projects.

The 45L incentive covers the cost of the equipment itself, the assembly, onsite preparation and the installation of the respective system or appliance.

There is no limit to the energy efficient home incentive for most kinds of residential property. If the incentive amounts to more than the tax owed, you can carry the unused portion of the incentive for the particular year to the tax returns for the next year.

All of the improvements have to be made to residential property located in the United States. The property can be a second home or a vacation property, in order to qualify for the energy efficient home tax incentive.

Solar Panels and Solar Water Heating Equipment

The use of solar technology to make your home self-sustainable will give you an opportunity to qualify for the energy efficient home incentive.

Residential solar panels have become incredibly popular and common. The cost of the technology decreased over the past 10 years and the availability of taxation stimuli made many residential property owners take the decision to give this technology a try.

The addition of solar panels to residential property increases its value, decreases the carbon footprint and produces significant electricity bill reductions. American households that install solar equipment can expect to save approximately 20,000 dollars on their bills in the 20 years after getting the solar panels.

Wind Turbines for Residential Purposes

The energy efficiency home incentive is also available for the installation of wind turbines for the production of electricity.

Though wind turbines are still predominantly seen as a commercial type of improvement, their popularity among residential property owners is also growing. The installation of such equipment provides an insurance against the growing costs of electricity. Turbines are safe, quiet and very easy to maintain.

In order to benefit from this kind of equipment, you need to live in an area that is known for its windy weather. The speed of the wind should be at least 10 miles per hour for such projects to make sense.

Other Qualifying Improvements

Geothermal heat pump installation will also give you the opportunity to qualify for an energy efficient home tax incentive. Keep in mind that energy efficient equipment that is used for the heating of a swimming pool, for example, will not qualify for the tax incentive.

Fuel cell installation is the last possibility. Once again, 30 percent of the cost of the project will be covered. The fuel cell should be installed to a principal property in the US and its capacity has to be at least ½ kilowatts. The tax incentive for this kind of equipment cannot exceed 500 dollars per individual cell.

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