Winter Sun Construction, LLC
828-342-0873Located in Franklin, NC

The federal stimulus act has made now the right time to act to make improvements to your home. A host of tax credits are available to reduce the cost of certain home improvement projects. Credits are available for improvements in a building’s envelope, or shell, its Heating, Ventilation and Air Conditioning (HVAC) systems and for the addition of renewable energy systems. Improvements to the building envelope are eligible for a 30% credit on the cost of materials with a limit of $1500 for all improvements combined. HVAC upgrades receive a 30% credit for the cost of labor and material with a maximum of $1500 for all improvements. Renewable energy systems offer the most lucrative credit of 30% of the total cost with no maximum limit for equipment placed in service before 2017. This credit may be carried forward to the next tax year. Performance requirements exist for all equipment installed and should be considered before purchasing a system.

Building envelope improvements include upgrades to the parts of the house that connect outside to inside. Credits are available for insulation, window and door replacement and new roofs. Adding insulation is always a cost effective measure to reduce power bills almost instantly. Generally an insulation installation will qualify for the credit. Aging windows and doors can be a cause of air leakage and heat loss reducing a home’s energy performance. To qualify, windows and doors must have a U-factor and SHGC of less than 0.30. Storm doors and storm windows are an easy add-on and can also be tax-credit eligible if IECC qualified for the climate zone and window over which it is installed. Metal and asphalt shingle roofs are eligible if they are Energy Star qualified.

HVAC refers to the systems that heat or cool a building. Credits are available for improving a range of different systems including central AC, air source heat pumps, furnaces, hot water boilers, water heaters and biomass stoves. Modern heating and cooling systems can dramatically affect the comfort level in a home. Air source heat pumps are a common conditioning system on newer construction and are an effective upgrade for existing residences. Qualified air source heat pumps have a SEER greater than or equal to 15 for split systems and SEER greater than or equal to 14 for package systems. Modern water heaters have vastly superior performance to models that are only ten years old. Replacing old water heaters can dramatically reduce power bills. New electric water heaters must have an Energy Factor greater than or equal to 2.0; this is also the minimum Energy Star rating. Gas or propane water heaters must have an EF greater than 0.82 or a minimum efficiency of 90%. As of the beginning of June 2009, no Energy Star rated gas condensing water heaters of gas storage tanks qualify for the credit. Biomass stoves (wood stoves) burn biomass fuel for heat or hot water. To qualify, thermal efficiency rating must be at least 75% as measured using the lowest heating value. As of June 2009, the credit is not applicable to stove inserts.

Renewable energy systems offer the most lucrative tax benefits with a federal tax credit of 30% on the total cost of system installation for installations before 2017. This credit may be carried forward to a future tax year. Additionally, North Carolina offers one of the most competitive tax credits in the nation. The state tax credit is equal to 35% the total cost of the system and may be carried forward up to five years. The North Carolina credit is limited to $1400 for residential solar water heating systems, including pool heaters. (Pool heaters are NOT eligible for the federal credit.) For residential photovoltaic (PV) systems, the maximum North Carolina credit is $10,500. Solar water heaters must be SRCC certified to qualify and the credit applies only to the solar water heating equipment, not the entire water heating system. Qualified solar electric (PV) installations must provide electricity for the residence and meet applicable fire and electrical codes. Currently, Energy Star rated geothermal heat pumps qualify for the credit.

In addition, North Carolina has a property tax exemption on solar electric systems whereby 80% of the appraised value of PV systems is exempt from property tax. There is also a statewide sales tax holiday for energy efficient appliances during the first weekend in November. Clothes washers, freezers, refrigerators, air source heat pumps, ceiling fans, dehumidifiers and programmable thermostats that carry the Energy Star seal are eligible. Duke Energy is also making upgrading more affordable with their Smart Saver program. Air source heat pumps with SEER 14 or greater qualify for $200 rebate after the system is installed by a licensed HVAC contractor.

With all of the tax credit and incentive options available, now is a great time to consider upgrading your home’s building envelope and HVAC systems or adding a renewable energy system. By taking advantage of the federal stimulus plan, you can improve your home’s energy efficiency now and its future resale value. More than that, your family will live in healthier home and you will be helping to green up our community. (As with all tax-related matters, consult a tax professional before making any purchases or signing a contract.)