NAHB: energy-efficient tax credits a boon for homeowners

By Ken Ryan

Michael Strong, a remodeler who specializes in green homes, calls the newly expanded energy tax credit law “one of the best kept secrets for consumers.” He didn’t mean it as a positive, however.

The so-called Existing Home Retrofit Tax Credit (25C) has been in place since February 2009, but anecdotal evidence suggests that many U.S. homeowners are either unaware of its benefits or are slow to take advantage. (Unlike a rebate, the tax credit is not a payment but a credit against an individual’s tax liability. The process of claiming it is part of a personal income tax filing.)

Strong was one of three home remodelers who spoke at a National Association of Home Builders (NAHB) briefing on May 12 to discuss the tax credit program and to identify ways in which consumers can take advantage of an opportunity to save money and improve their primary residence.

Strong, president of Houston-based Brothers Strong, said remodeling homes and making them greener and more energy efficient “is our full-time job. This is hugely important for us, and we’re getting out the word.”

Strong Brothers spends considerable time extolling the features and benefits to homeowners; it also provides a cost analysis. “Part of our role is to not only quantify the payback but to let them know the face value can be reduced if they take advantage of the tax credit,” Strong said. “We do the math. Sometimes when we run the numbers, we show how affordable it is. We sell them on the affordability and return on investment.”

Donna Shirey, president of Shirey Contracting, Issaquah, Wash., said the day is coming when “the consumer is going to be driving the industry toward energy-efficient homes.”

The expanded federal tax credit refunds 30% of the product replacement cost, up to a total of $1,500. It can be used for HVAC systems, insulation and water heaters, windows, doors and insulation as long as the new products meet IRS qualifications. In some cases, installation costs may also be applied to claim the tax credit.

Moreover, the new law has increased the energy efficiency standards for building insulation, exterior windows, doors, skylights, certain central air conditioners and natural gas, propane or oil water heaters placed in service after Feb. 17, 2009.

There are four types of upgrades that are covered, three of which apply to the home improvement industry. The first type is home-shell improvements like insulation, windows and sealing. These are designed to make the home tighter and close up leaks. The next type is home heating, ventilating and HVAC. This includes efficient air-conditioners and furnaces. A third type is renewable energy technology like geothermal heat pumps, solar water heating, small wind generators and photovoltaic (PV) systems.

The credits for the home shell and HVAC are available if homeowners make these investments before Dec. 31, 2010. Investments in renewal energy systems -- known as tax credit 25D -- are eligible for credit until Dec. 31, 2016.

Greg Miedema, NAHB Remodelers chairman and president of Dakota Builders in Tucson, Ariz., said that remodelers can help find the best methods of saving energy with an assessment like a home energy audit. “Tightening the house to reduce air leakage by adding insulation, fixing ducts and installing a more efficient heating and air conditioning system can help save on energy bills today while also reducing next year’s tax bill,” he said at the briefing.

Strong said he recommends homeowners hire a certified green professional to conduct an energy audit before any work is contracted. “Without a certified green pro, it would be challenging to find any contractor who was even aware of the [tax credit] benefits,” he said.

Home energy audits can cost $500 and up -- and are not included in the 25C tax credit -- but experts say the expense pays for itself with savings from efficiency upgrades. Thorough audits involve the use of equipment, including blower doors, which measure the extent of leaks in the building envelope; and infrared cameras, which reveal hard-to-detect areas of air infiltration and missing insulation.

Strong said his energy audits rely on more than just technology and equipment. “We take into consideration who lives there, their habits,” he said. “In the end, it’s three parts science, one part common sense. It doesn’t always boil down to a software program.”

Tax credits or not, the move to green building and energy-efficient homes is well underway, said Shirey, whose business has been building green homes for more than 20 years.

To demonstrate what is possible, Shirey and her husband are building a state-of-the-art, energy-efficient home in Bellevue, Wash. When completed, the home will consume significantly less energy due to the use of structural insulated panels (SIPs), which are highly energy efficient and cost effective compared with traditional stick framing and fiberglass insulation. Shirey said the high level of insulation provided by SIPs means the amount of energy used to heat and cool the home will be cut by as much as 50%.

The home’s PV solar panels will provide most of the power, while a 1,200-sq.-ft. vegetated green roof will reduce storm water runoff and extend the life of the roof among other eco-friendly benefits. In addition, the home comes with Energy Star lighting, windows, appliances and in-floor radiant heating as well as an energy monitor that displays energy input and output in real time. It is the green home of the near future.

“We’re doing this project so people can see and learn about the options that are out there,” Shirey said. “There is a better way to build houses, and I think it’s time all consumers knew it.”