Tax Benefits of Green Home Improvements*
Save money with tax credits on green home renovations to make your home more energy-efficient
If you're considering a home improvement project, it could be worth your time and money to invest in materials and appliances to make your home more energy-efficient. Not only can these renovations save you money in the long-run by reducing your heating and electric bills, but they could also earn you green tax credits you wouldn't receive with standard appliances.
Here are some examples of green home improvement projects that can save you money and make your home more marketable and comfortable.
- Installing energy-efficient windows and doors
- Purchasing Energy Star appliances for your kitchen
- Using geothermal heat or air source heat pumps
- Purchasing a biomass stove to help heat your home
- Installing a gas, oil or propane hot water heater
- Updating to greener HVAC systems
- Installing solar panels to heat your pool or hot tub
- Re-insulating your home with newer, more energy-efficient systems like weather stripping or air sealing methods
- Replacing your roof with a metal, Energy Star-rated roof
How do green tax credits work and what are Energy Star ratings?
The Internal Revenue Service (IRS) recognizes the importance green home renovations could have on our environment and economy, and so they may offer tax credits for homeowners who decide to be environmentally conscientious. The IRS requirements for green tax credits change almost every year, so it's important to check the official IRS website for the most up-to-date information.
Energy Star ratings are the stamp of approval for green products and appliances. You can visit the Energy Star website to learn about green home improvements that are applicable to your area, as well as which products currently qualify for green tax credits. These tax credits generally apply to remodeling or green home renovations only, rather than initial building materials for a new home.
What are the long-term benefits of green home improvements?
Beyond the immediate tax benefits, there are tangible, long-term benefits to making green home renovations. The idea behind most green home improvements is to keep your home warm in the winter and cool in the summer by eliminating areas where heat could escape or enter the house. But, for the average consumer, the most important thing is the long-term cost savings you will see in addition to the green tax credits.
- Energy Star efficient windows and doors have glass designed to let less heat through, so neither your air conditioning in the summer nor your furnace in the winter work overtime. This keeps you from wasting money on high energy bills.
- Caulking around windows and doors and using spray foam in problem areas like the attic also help insulate the home.
- Energy Star appliances reduce your water and electric bills by using less energy for everyday processes like cooking, refrigerating food, and running the dishwasher.
- Solar heaters can be used to heat water in your home in place of a typical hot water heater.
Use your home equity as a home renovation loan for your green home renovations
When you've decided on the green home improvements you want to implement, the next step is figuring out how to pay for them. First, determine how much your project will cost, including contractor hours, materials and the costs of appliances. You should get quotes from several different contractors before making a decision to be sure you're getting the best deal.
Finally, consider a home equity loan to pay for your green home renovation. A home equity loan borrows against your home's equity by delivering the money in one lump sum. These loans have a fixed interest rate, and you'll start repaying the loan's principal plus interest once you receive it.
Borrow off a home equity line of credit for your home renovation loan
A home equity line of credit (HELOC) is a type of home renovation loan that functions as a revolving line of credit, like a credit card, allowing you to borrow only what you need. Once you get approved for a HELOC, you can borrow up to the amount you've been approved for whenever you need it. You can always pay it off and borrow again later.
With a HELOC, you only repay the money you borrow with interest, and there may be flexible payment plans available. Lines of credit use an adjustable interest rate based on the prime rate, but capped rate HELOCs are available if you qualify.
Take out a home equity loan with Citizens Bank to cover your green home improvements
When you're ready to start your green home renovations, speak with a Citizens Bank Home Loan Advisor to discuss your home loan options, or start the home equity application process today by filling out a quick contact form online.
*This page is intended to provide general tax information for green home improvements. It is not to be used as tax advice and should not be relied upon in the preparation of a tax return. IRS rules and policy nuances may be complex in some areas. Taxpayers should consult with a competent tax advisor or the IRS to determine how their own circumstances are affected.