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Stimulus bill increases rewards for energy-efficient remodeling
Journal Photo by Walt Unks
David Marshall of Marshall and Manuel Insulation Co. blows cellulose insulation into the attick of Hugh and Betty Jo Motsinger, increasing insulation value and qualifying the Motsingers for a tax credit.
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Published: March 1, 2009
The spray-foam insulation that Leigh Anne Schwietz and Matthew Yetter recently added to the crawl space underneath their Winston-Salem home has made them warmer.
Next year, it will save them more on their tax bill, too.
The couple unwittingly benefited from a component of the $787 billion economic stimulus package that provides tax credits to people who improve their home's energy efficiency.
By adding the insulation earlier this year, Schwietz and Yetter will be getting a $1,500 tax credit -- three times more than they expected.
"We just got lucky," Schwietz said.
The stimulus bill signed by President Obama last month includes incentives aimed at encouraging homeowners to invest in energy-efficient technology and products.
Among the highlights is a 30 percent tax credit for homeowners who install energy-efficient windows, insulation or heating systems in 2009 and 2010. The maximum credit value is $1,500.
Previously, the tax credit was 10 percent, with a $500 cap.
Energy-efficiency experts hope the tax credits will sweeten the deal for homeowners to insulate their homes or install environmentally friendly systems powered by wind, sun or geothermal energy -- moves that they say are long overdue as the U.S. strives to reduce energy consumption and carbon emissions.
Interest picks up
Local energy contractors said that homeowners' interest in energy efficiency has picked up recently.
"The economy has gotten people asking some of the more sensible questions that we should have been asking all along," said Danny Gough of Energy Solutions, a Winston-Salem company that conducts energy audits for homes and businesses. "We've got a lot of people who are interested in tightening up their existing homes."
Betty Jo and Hugh Motsinger of Wallburg are homeowners trying to cut their energy costs, and like others, stumbled onto a big tax break.
The Motsingers, who are retired, have taken on several home-renovation projects in the past year. Some of the changes are cosmetic, but many were designed to make the house more energy efficient.
Last week, they added insulation. And soon, Hugh Motsinger plans to install 12 high-efficiency windows. Those improvements will result in a 30 percent tax credit.
The tax credits are a help, Betty Jo Motsinger said.
"We're trying to save everywhere we can," she said.
Interest in energy-saving projects will continue to build as more people find out about the tax credits, said John Anderson, the director of marketing and sales for Insulation Solutions.
"As yet, it hasn't gotten enough publicity for most people to know about it," Anderson said. "I think it will definitely have an impact. Thirty percent (tax credit) can really change minds," he said. "It can say ‘I'm going to go ahead and do this because it makes a lot easier decision than previously.' It's gone from being an ‘oh, that's nice' thing to being a motivating factor in their decision."
The tax credits apply to installation costs of heating and cooling equipment, but not to the installation costs of windows, insulation and other improvements to the building shell.
Because the laws are still new, people interested in taking advantage of the incentives and rebates should first do some research. A good place to start is www.energystar.gov.
Solar or geothermal pays off
Some of the biggest winners from the stimulus bill could be homeowners who want to install renewable-energy systems such as geothermal heating, solar panels, solar water heaters or windmills.
The bill lifted a 30 percent cap on tax credits for geothermal and other renewable systems, though a 35 percent N.C. state tax cap is still in place. Now, instead of getting a maximum $2,000 back on such a system, eligible homeowners could be poised to get as much as 65 percent of the cost back with tax credits. The expanded credits are retroactive to Jan. 1 and expire on Dec. 31, 2016. To qualify, any system must meet Energy Star requirements.
"If you're doing solar or geothermal, it's a golden opportunity," Gough said. "If you want to retrofit your home with solar or geothermal, it's the best time since Jimmy Carter."
Under tax incentives developed during the Carter administration, homeowners were eligible for a tax credit of 40 percent off the first $10,000 spent on solar-energy systems.
Alternative-energy systems cost more to buy and install, and their advocates have always argued their long-term benefits as a selling point. Now they have another: In many cases, they say, the tax credits narrow the price gap between the two systems. Installing a geothermal heat system costs, on average, about 30 percent more than an air-source unit, but they cost less to operate.
"There'll be some cases where a more efficient option will actually be cheaper than a conventional option," Gough said. "That's a huge change."
The package also includes a host of other incentives, including a $300 million rebate program for Energy Star appliances, such as refrigerators, washers and dishwashers. The rebate program will be administered by each state, and details about how the program will work in North Carolina have not been completed. North Carolina also will receive about $136 million of the $5 billion budgeted for weatherization projects in low- and middle-income homes.
As a result, more people will be eligible and more work will be done at each home that qualifies, said Zack Hamlett, the director of the Office of Economic Opportunity for the N.C. Department of Health and Human Services, the agency that will distribute the weatherization money.
Get an energy audit
Before tackling an energy-efficiency project, experts advise people to get an energy audit so they can pinpoint the most pressing problems.
Schwietz and Yetter hired an energy auditor to help them tighten their 3,200-square-foot home in Buena Vista.
"I think the key is really in the energy audit," she said. "You can spend a lot of money putting things in, but unless you have an energy audit that shows where the cold air is coming in, you may be spending money and not getting a big return."
Gough cautioned people not to get their homes assessed by someone with ties to a particular product.
Residential Energy Services Network, a nonprofit organization of industry experts, sets standards for home energy ratings. Its Web site, www.resnet.us/, includes a listing of home energy raters.
An energy audit, or assessment, begins at about $500, Gough said.
Robert Smith, a consultant on solar power with Sun Power Systems, said that now is the time for people to take advantage of the incentives.
At first, he said, the government will offer incentives to install energy-efficient products, but it may eventually require their use. "Everyone is going to have to comply sooner or later. I'd suggest they take advantage of it now when there is an incentive to do it."
■ Lisa O'Donnell can be reached at 727-7420 or at lodonnell@wsjournal.com.
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