Federal Tax Credits for Energy-Efficiency Home Improvements in 2006-2008

Air Sealing 10% of materials cost up to $500. The correction of leakage points in the exterior shell of air-conditioned homes is first priority, even before insulation. Weatherstrip, caulk and otherwise stop airflow through attic access doors, pipe and electrical penetrations, fireplaces, recessed lights, windows, doors and other vulnerable areas.

Insulation 10% of materials cost up to $500. Insulate to the R-values listed in the Energy Code for your location. Properly installed insulation on the roofline (for unvented attics) or on attic floors (for vented attics) can be a first line of defense to protect homes from heat gain and loss. Insulation for attic kneewalls, floors and uninsulated walls is also important. Many material options (batts, blown, spray-on, rigid, qualified radiant barriers, etc.) are available, so be sure you get the R-value needed and good coverage without gaps or compression. Different materials may be needed for various parts of your home. The manufacturer’s installation instructions must be followed to ensure the performance of the product. Other considerations include fire and insect retardants (such as borates) and to what degree the insulation reduces air infiltration. Some materials are recycled or recyclable. Seek more information to help you avoid moisture problems, especially in air-conditioned homes. Wherever there is a risk of flooding, fibrous materials should be avoided and rigid foamboard or sprayed-in closed-cell foam should be considered to 1 or 2 feet above the level of flood risk.

Painted Metal Roofs 10% of materials cost up to $500. For the tax credit, find the Energy Star label on painted metal roofing materials. White and new high-tech “cool color” pigments help reduce solar heat gains.

Windows and Doors Maximum $200 credit (of the total $500). Energy Star-labeled windows and doors (including skylights and storm windows) qualify. Including them in new homes is highly cost-effective, but the question of whether to replace windows in existing homes is harder, because the “payback” can be long in comparison to other energy-efficiency investments. Weigh your options carefully.

Heating, Ventilation and Air-Conditioning (HVAC) Up to $300 credit. Be sure to work with a contractor who performs a detailed Manual J load calculation to size your new system properly, especially when you make energy-efficiency upgrades. Moisture concerns are crucial in warm, humid climates, and oversized systems make humidity problems worse. Get an energy rater or your contractor to test your duct system for air tightness and correct any leaks. This $300 tax credit applies to: Split systems (those with separate indoor and outdoor units) rated EER 12.5 or SEER 15 and single-package systems rated EER 12 or SEER 14. Air-source heat pumps rated EER 13 or SEER 15 and HSPF of 9. Ground-source heat pumps that meet Energy Star criteria; closed-loop systems are preferred to conserve water. The wells for these systems make them more expensive initially, but their very high efficiency, long life and low maintenance make them highly cost-effective over the life of the system. Gas, oil, propane furnaces or hot water boilers rated AFUE 95 — $150 credit. Advanced air handlers (maximum 2% of furnace’s total energy usage) — $50 credit.

Hot Water Systems A $300 credit for the following Energy Star-rated systems: Natural gas, propane or oil-fueled water heaters with an Energy Factor (EF) of at least 0.80. Most qualified units are “on-demand” or tankless systems, which save the energy used to keep a tank heated all the time and save the space normally used for a tank. Electric heat pump water heaters rated EF 2.0.

Renewable Energy Systems Installation and material costs are included in the calculation for these credits. If you don’t owe as much tax as the credit, the remainder of the credit can be carried forward through at least 2007. You can claim credits for both solar hot water and photovoltaics (PV) for a possible combined $4,000 credit. Solar Hot Water 30% of expense up to $2,000 credit. This is the most cost-effective first step toward active solar energy use in a home. To receive the credit, the system must be certified by the Solar Rating and Certification Corporation (SRCC), produce at least half of the home’s hot water usage and not be connected to swimming pools or hot tubs. Solar Electric (Photovoltaics or PV) 30% of expense up to $2,000 credit. To minimize the size and cost of PV panels or other renewable energy systems to produce electricity for your home, it is wise to first maximize the overall energy efficiency of the home. Check on net-metering in your area, which allow you to benefit when your PVs produce more energy than needed. PV systems can include batteries if desired and can be a good solution for remote areas and backup power in emergencies. Rooftop panels and pole-mounted systems are increasingly available, affordable and wind-resistant. Other Renewable Energy Systems Wind systems (30% of expense); fuel cells and microturbines (30% of expense up to $500 for each 500 watts of installed capacity) can provide energy free of the electric grid.