As energy costs continue to rise, you may want to keep your utility bills low by making your home more energy-efficient. There are a number of things you can do to lower your energy consumption on a long-term basis, including purchasing energy-efficient appliances, installing renewable energy systems, and undertaking green remodeling projects. These upgrades not only help you save on your energy bills but also usually qualify you for energy tax credits and rebate programs, which provide additional savings. Check out this comprehensive guide to learn how energy efficiency incentive programs work and how you can get them.
The purpose of an energy efficiency incentive program is to encourage homeowners to improve the energy efficiency of their homes so that they can do their part to protect the environment. Such a program provides you with financial assistance for energy-efficient home improvements in the form of tax credits, rebates, or other incentives. The entity that offers an energy incentive program may be the federal government, state government, or a private sector company.
There are many organizations offering a wide range of energy incentive programs to help homeowners go green. Below is a list of incentives available to residents of Indiana and Michigan:
To promote energy-efficient home improvements, the federal government gives homeowners tax breaks to offset the costs of their repairs or modifications. Unlike a rebate, a tax credit isn’t cash in your hand, but it can be claimed on your annual tax return to reduce the taxes you need to pay as a homeowner. The types of tax credits available may vary from one year to another. For 2020, you’ll be eligible for a federal tax credit if you add any of the following home improvements:
Different states may offer different types of energy efficiency tax credits. If you live in Indiana, you may qualify for a state tax credit if you switch to a renewable energy source, such as solar, wind, or geothermal. For example, if you install solar panels in your home, the assessed value of your system will be exempt from property tax. Additionally, some of the components of a solar energy system aren’t subject to sales tax, such as solar modules, inverters, and racking.
Michigan’s state energy tax credits are available only to lower-income homeowners. Homeowners filing single returns must earn an annual income of no more than $37,500 to be eligible for the credits, while those filing jointly with a spouse must have a collective income of $75,000 or less. Qualifying home improvements include windows, insulation, furnaces, water heaters, refrigerators, washing machines, and dishwashers, all of which must meet Energy Star requirements.
Neither Indiana nor Michigan has a state energy rebate program, but you may be able to get rebates from your utility company. Many utility companies in these two states offer rebates for a wide array of energy-efficient upgrades, from replacing inefficient HVAC systems to installing solar panels.
For example, Southern Indiana Rural Electric Co-Op has an energy rebate program that can help homeowners save on high-efficiency heating and cooling equipment. Some of the appliances and systems that are eligible for a rebate include central air conditioners, energy-efficient water heaters, electric thermal storage units, and air-source, geothermal, and dual-fuel heat pumps.
In Michigan, customers of Michigan Gas Utilities can get rebates for energy-saving home heating, water heating, window replacements, and air sealing as well as the use of Energy Star-qualified appliances. The company also offers affordable or free home energy assessment and weatherization services to enable homeowners to reduce energy consumption in their homes.
Some energy-efficient home improvements can be very costly, running into thousands or even tens of thousands of dollars. If you’re planning to install a high-efficiency central HVAC system or a solar energy system, you may need financing to cover the cost.
Unfortunately, the state of Indiana doesn’t have an energy efficiency loan program to help you afford expensive energy-saving home upgrades. Nevertheless, you can try to get a loan from some utility companies, banks, or credit unions. South Central Indiana REMC is one of the utility companies that offer energy efficiency loans. Its Residential Energy Efficiency Loan Program allows you to borrow up to $10,000 for the installation of a geothermal heat pump or solar water heater.
Similar to Indiana, Michigan also doesn’t provide financing for energy-efficient home improvements. However, its Public Service Commission established and funded a nonprofit company called Michigan Saves in 2009. Although it has become an independent green bank now, Michigan Saves continues to work with utility companies and private sector lenders to make affordable loans and incentives available to homeowners and business owners throughout the state. It supports a wide range of energy-efficient projects, including insulation, air sealing, window replacements, low-flow plumbing fixtures, roofing, solar panels, HVAC upgrades, water heaters, and electric vehicle charging stations.
If you’re interested in getting a federal energy efficiency tax credit, you have to fill out IRS Form 5695 and submit it with your income tax return. In some cases, a state energy tax credit or exemption may require you to complete an application before you start your home improvement project. Check with the tax authority of your state to find out how to apply for the credit. If you’re planning to get a rebate or loan from a utility company or another private sector organization, you can get information about the application process on its website.
If you want to know whether the home improvement project you’re planning to carry out qualifies for a tax credit, rebate, or loan, don’t hesitate to speak with the knowledgeable staff at Energy Diagnostics. Contact us today to find out about our top-notch energy efficiency services.