Smart Energy Living - November 2011

Tax Credits for Home Efficiency Expire Soon:
Federal deals just part of the package of available incentives

By: Rebecca Cantwell


Consumers are fast running out of time to claim tax credits on part of the cost of making homes more energy efficient.

The tax credits apply to certain home improvements that are "placed in service'' by December 31, 2011, so just making a purchase by then isn't enough. The improvements need to be installed as well, either by a home owner or a contractor.

The credits can make home energy projects pencil out more quickly, especially if combined with programs offered by utilities and local governments.

“The outlook for renewal of federal energy efficiency tax incentives is uncertain at best,” stated Alliance to Save Energy President Kateri Callahan, “so we encourage homeowners to complete those upgrades before the ball drops in Times Square at midnight on New Year’s Eve.

“Making efficiency improvements this year will lower home energy bills and improve home comfort for years to come, while also reducing 2011 federal income tax bills,” Callahan added. “Energy efficiency is truly the gift that keeps on giving!”

Savings can mount quickly

Until the end of 2011, homeowners are eligible for a federal income tax credit of 10 percent of the cost - up to $500-- for making improvements to the “building envelope” which covers insulation, air sealing projects and certain types of roofs. Energy efficient windows are eligible also, but subject to a $200 credit limit.

You can find more details about the tax credits here:

Other improvements are subject to dollar limits without the 10 percent cap. They include: 

  • --$300 for “energy efficient building property” which includes qualified biomass stoves for heating; electric heat pumps and certain water heaters
  • --$150 for qualified furnaces and hot water boilers
  • --$50 for advanced air circulating fans for heating and cooling systems
  • --An extension to the $2,000 new homes tax credit for builders who construct homes much more efficient than typical homes.

Generous federal tax credits are still available for renewable energy with no upper limit: eligible systems include geothermal heat pumps, solar energy systems and wind energy generators. You can receive these through 2016 even after you use the energy efficiency tax credit.

Beyond federal tax breaks

In addition to federal incentives, other forces are at play as well. In the majority of states with renewable energy portfolio standards, utilities must beef up their renewable energy offerings and thus are providing incentives to consumers to help them add systems such as solar and wind.

Other utilities are being required by regulators to reduce the demand for energy through conservation programs and are thus helping consumers help them save energy. Still other programs are the result of other local, state and utility policies.

Colorado's rebate program, funded by the American Recovery and Reinvestment Act ( the recovery act) has concluded.  

Begin with the house doctor

So where do you start deciding what makes sense for your home?

Many energy efficiency experts recommend you start with a visit from the house doctor. Just as you might start a major personal health campaign with a diagnostic visit to your doctor to understand all the ways your body’s systems might work together better, it’s helpful to think of your house as a system.

Diagnostic tools range from the very simple -- such as do- it- yourself guides available on many energy conservation web sites -- to the very sophisticated, such as using a blower door to test your home’s pressure, and pointing infrared cameras at ducts to detect air leaks.

Xcel Energy (, through its partner Lightly Treading, Inc., offers three different levels of audits costing $60 to $120, including a customized plan. Participants in the Home Performance with Energy Star program in Xcel’s Colorado territories can earn $640 or more in rebates by making three required improvements ( air sealing and weatherstripping, attic insulation and bypass sealing and high efficiency lighting) along with at least two additional optional improvements.

Tighten your home

Often the most cost-effective way to make your home more energy efficient is to plug up the leaks. The most efficient heating or cooling equipment will still waste energy if there are leaky areas around your ceiling can lamps or under your outside door.

Adding insulation, from the ceilings to the walls is often one of the most cost-effective ways to save energy. Saving up to 20 percent on heating and cooling bills, compared to a leaky home, is often reported.


Windows have come a long way since manufacturers started putting a coating on glass to reflect heat away (known as low-e) about 30 years ago. But many homes still sport inefficient single pane windows which can be big contributors to wasted energy.

Windows are a big ticket improvement and with the new credit capped at $200, it’s worth careful study. While the tax credit was reduced, more windows now qualify. Those branded Energy Star will be eligible for the credit.

Heating and Air Conditioning

Heating and air conditioning often represent the biggest single part of a consumer’s energy bill and new equipment can be less expensive with the help of the currently available programs.

Utility rebates and equipment rebates through state programs may lower the cost substantially more than the federal tax credit alone.

Consulting with qualified dealers or other experts is important because of the many variables involved - and because of the new federal rules. But generally, energy-efficient credits are only available for furnaces with a rating of 95- meaning 95 percent of the gas goes to heat your home and only 5 percent for exhaust.


This year’s rules give manufacturers of efficient clothes washers, dish washers and refrigerators specific rebates for models produced in the last three years. The credits are offered on a tiered system depending on the efficiency of the appliance. Consumers are likely to benefit from resulting lower prices for these units. More details are available by visiting Energy Star (http://www/

Renewable Energy Systems

Tax credits for eligible renewable energy systems are even more generous than those in place for energy efficiency. Eligible systems must be “placed in service” by the end of 2016 and the credit covers 30 percent of the cost, with no upper limit.

An exception is fuel cells, for which the credit is capped at up to $500 per .5kW of power capacity.

The other renewable energy credits cover:
--Geothermal heat pumps that meet efficiency ratings
--Solar water heating systems in which half the energy comes from the sun. These must be certified by the Solar Rating and Certification Corporation.
--Solar electric systems, consisting of photovoltaic systems that must meet applicable fire and electrical codes.
--Residential small wind turbines with a name place capacity of not more than 100 kilowatts.

For more information:
These websites provide additional information and detail about incentives and should be consulted before you make purchasing decisions:

Alliance to Save Energy: (

American Council for an Energy-Efficient Economy (

Colorado Governor’s Energy Office: (

Database of State Incentives for Renewables and Efficiency:   (

Energy Star tax credits: (

National Association of State Energy Officials: (

Tax Incentives Assistance Project: (

U.S. Department of Energy: (

Xcel Energy: (


Photo on the home page:
Boulder's NZE House, designed by Architropic: A net-zero energy house and winner of the 2011 CRES Renewable Energy in Buildings Award, residential category. Photo by Allison Fleetwood.

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