Use tax incentives to pay for "green" upgrades

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Reduce your energy usage through home upgrades which will lower your bills AND help the environment... and let the government help pay for it!

The federal government offers various subsidies and credits to offset the cost of home upgrades that are environmentally friendly. You can find all of the details on the website, but the basics are:
  • Pay for a qualified upgrade by 12/31/2010 (up to $5,000 total, for $1,500 in credits)
  • Get reimbursed as a tax credit, when you file your 2010 taxes (learn more here about how to apply)
You should also check available incentives in your State in the Database of State Incentives for Renewables & Efficiency which may include some of the same items (in which case you can stack up the savings) or additional ones as well.

So how do you decide whether or what to do?

From a cost standpoint, the main consideration is how much you have to pay now (after all of your tax savings), and how much you stand to save on energy costs each year as a benefit. That tells you how long you have to wait to make back your money. Then you have to decide it it's worth the long-term investment based on how long you will be in the house, etc.

A good place to start is with an energy audit, so you can get a sense of how much you might be able to save. If you're willing to pay a bit more, you can get a professional energy audit (which can cost $150-400) or save some money with a do-it-yourself approach.

As an example, an upgrade that costs $2,000 before credits and saves you $350 per year in energy savings, works out like this:
  • $2,000 before credit - 30% credit ($600) = $1,400 final cost to you, after credit
  • $1,400 final cost / $350/year savings = 4 years to pay back
These might also boost the re-sale value of your home, since the new buyer will get on-going benefits from the work you have done, which could make some upgrades a true no-brainer.

LOZO recommends seriously considering upgrades that pay back in 2-4 years, and still thinking about options that have a longer payback if you are likely to be in the house long enough to re-coop the benefits. Since most of our energy costs go towards heating & cooling, upgrades like insulation, windows and doors may provide some good opportunities. All in all, by fixing problems you can lower energy bills by 5% to 30% annually, according to the U.S. Department of Energy’s office of Energy Efficiency and Renewable Energy which can mean up to $660 yearly savings on an average $2,200 annual energy bill.

As of November, 2010 some of the more common qualifying expenses include:
  • Biomass Stoves
  • Heating, Ventilating, Air Conditioning (HVAC)
  • Insulation
  • Roofs (Metal & Asphalt)
  • Water Heaters (non-solar)
  • Windows & Doors
See the complete list and all qualifying details at

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