Upgrading your home insulation is one of the best investments you can make for your family. It provides immediate financial benefits as well as long-term savings on your energy bills.
Home insulation is eligible for a federal tax credit. This energy-efficiency credit reduces your federal taxes owed by up to $500 or 10% of the cost, whichever is lower.
Types of Insulation
Insulation acts as a barrier between the inside of your home and the significantly different temperature outside. It is one of the most critical components for energy efficient homes, and it has the potential to dramatically reduce power bills. Fortunately, there are a wide range of financing options to help ease the upfront cost. In addition, many homeowners can claim hefty tax credits or incentives for insulation upgrades.
The type of insulation you choose will depend on the design and construction of your home. For example, if your house has a concrete foundation, you will likely need to use a rigid foam insulation product. This type of insulation prevents cold air from seeping through the ground, which would otherwise raise utility costs. Foam is also the best option for new construction projects because it can be installed in walls before the drywall goes up.
When choosing insulation products, always check for certification labels to ensure that the product satisfies energy efficiency standards. Additionally, it’s a good idea to work with qualified insulation contractors for installation. This will ensure that the process is carried out properly, which will improve your chances of claiming a credit. Furthermore, the contractor will be able to provide a detailed report for your energy audit, which can further strengthen your claim. Finally, keep in mind that insulation tax credits typically function as one-time benefits and can only be claimed within a specified time frame.
Tax Credits
Many homeowners are unaware that they may be able to claim tax credits when they remodel their home with energy efficient or clean energy equipment. These can include insulation, furnaces and water heaters, wood burning stoves, biomass fuel furnaces, and even exterior doors and windows.
According to Business Dictionary, a tax credit is “a state form of discount, exemption or deduction subtracted from the amount of taxes owed.” Tax credits differ from deductions and exemptions because they are subtracted directly from the total amount owed to the government. You can determine your taxable income by filling out your tax return forms.
Financing Options
There are financing options available to help ease the cost of a home insulation project. For example, a homeowner can apply for an unsecured loan from EnerBank USA that has low monthly payments and a predetermined term of repayment. The lender considers a number of factors including credit score when determining eligibility.
Another option is to use a property assessment certificate (PAC) program, which allows homeowners to borrow money against their current property tax for energy efficiency improvements. These programs are typically facilitated by local governments and enabled through state legislation. They are financed by the sale of municipal bonds and administered through authorized local lenders.
The residential energy efficient property tax credit is worth up to $1,200 per year for homeowners who upgrade their homes with eligible insulation and air sealing materials and systems. This credit is only applicable to the primary residence of the taxpayer and does not include new construction. It is also subject to annual maximum and cumulative/carryover limits, so it’s best to consult with a qualified tax professional to ensure the exact amount for which you can claim.
Properly insulating your home is essential to the success of renewable energy technologies such as solar panels and geothermal heat pumps, which rely on a well-insulated living space to function properly. This helps reduce the carbon footprint of your home and makes it more comfortable while saving you thousands on your monthly utility bills.
Installation
The type of insulation you choose and the way it is installed will play a key role in whether or not you qualify for an energy efficiency tax credit. In addition, it will be important to verify that the installation company you select is certified and experienced in delivering the best possible results for your home energy upgrade project.
When claiming an energy-efficient home improvement tax credit, you will need to keep meticulous records of all expenses and documentation associated with the product purchases and installation services. This will make the claiming process much more seamless and easy come tax season. Be sure to include receipts, manufacturer certification, and the detailed results of a home energy audit report with your federal income taxes filing.
In addition to the home insulation energy-efficiency tax credit, you may be eligible for additional state or local rebates or incentives. These can help offset the initial investment costs and significantly lower your energy costs in the long run.
Regardless of the financing options you consider, a high-quality home insulation project is well worth the upfront financial investment. Not only will it dramatically reduce your electricity bills, but it will also increase the value of your home and provide peace of mind for years to come. To get started, be sure to check out the financing options available for insulation upgrades and speak with a home energy expert about your needs.