Saturday, August 22, 2009
The American Recovery and Reinvestment Act needs a catchier name. How about "Cash for Clunkers: Home Edition"?
Cash for Clunkers was a big success. But the program that gives even more money to homeowners who improve their energy efficiency hasn't caused a rush at the dealers.
Perhaps its because the American Recovery and Reinvestment Act just isn't a catchy name, so based on a comment by Stephen Colley, long time SASL coordinator, we're going to call it "CASH FOR CLUNKERS: Home Edition".
The home edition of Cash for Clunkers is quite a bit more complicated than the automobile version. Tax credits are earned for installation of energy efficient devices. The IRS is still working on the final guidelines on what products qualify and on what documentation is necessary but until they do, they say to rely on manufacturer ratings and keep all your receipts and communications with sellers and installers, so there's no need to delay. IRS:Energy Incentives for Individuals in the American Recovery and Reinvestment Act .
Of course, our standard SASL disclaimer applies. (See the sidebar.) Do not rely on this site for tax advice.
Hanely Wood, the trade magazine publisher, has a great site that explains the act with regard to home improvements, www.thestimulussource.com and a regularly revised chart showing the home improvement Stimulus at a Glance.
Some improvements qualify for an unlimited 30% tax credit for all costs including parts and labor. These include: Geothermal HVAC Heat Pumps and Solar Water Heaters, Photovoltaics and Residential Wind Turbines. Fuel Cells and Microturbines earn a credit of 30% including parts and labor but limited to $500 per .5 kW capacity. This is the big credit, and you can receive credits for each of these you purchase. This is the heart of CASH FOR CLUNKERS: Home Edition.
The smaller credit is a maximum of $1500 when you spend $5000 (equipment only, no labor included) on a long list of qualifying improvements. The Congress set the standards high for these improvements. They include energy efficient windows, doors, roofing, insulation, biomass stoves, conventional central air conditioning, heat pumps HVAC (both split and the usual), furnaces and hot water boilers and theoretically water heaters, though as of today there are no qualifying models.
Although there are lots of categories for the smaller credit, you can only receive a total of $1500 in tax credits. Your credit is 30% so to get the maximum of $1,500 you must spend $5000. Any amount above $5000 will not earn additional credits in this category.
To me the really exciting thing about "CASH FOR CLUNKERS: Home Edition" is the unlimited credit for renewal energy items. Of these items, Solar Water Heaters and my favorite, Geothermal HVAC are great deals.
Southwest Mechanical Services estimates that in South Texas a geothermal system (which includes free hot water heating during A/C season) costs 35% more than the most efficient conventional system, including labor and the drilling of holes for a closed loop. With a 30% credit you get upgraded practically for free.
Even without a tax credit the energy efficiency of the geothermal will eventually make up for the price difference. Hard numbers are hard to come by because there aren't any double blind controlled HVAC studies but Southwest estimates that a geo system is 2 1/2 times as efficient as a 13 SEER HVAC heat pump.
Aside from the cost, geothermal is the one HVAC system that is just as effective when it is 105 degrees outside as when it is 88 degrees. Even if it didn't pay for itself, which it does, it pays for itself in comfort. My family's geo system cost $26,000. Under this program we would have received a $7,800 tax credit.
There are also CPS and state financial incentives to explore.
So what are you waiting for? Go out and trade your home clunker in and get some cash!
Photo courtesy of Almagill on Flickr with a Creative Commons license.