Save Money and Energy with New Tax Credits

Image Gallery New tax credits mean more money back for people who purchase solar panels, wind turbines, woodstoves, energy efficient windows and more. ISTOCKPHOTO/RYAN KELLY

Good news! Renewable energy systems just got a little more affordable. Thanks to federal tax credits that will go into effect in January 2009, U.S. homeowners can get money back if they purchase wind turbines or solar panels next year. There are tax credits for energy efficiency, too — including projects such as adding more insulation to your home, or buying energy-efficient windows.

All this is good news for the planet, because it encourages renewable energy and reduces the use of polluting fossil fuels. It’s also good news for your wallet, because over time, these types of energy upgrades can save you a lot of money.

How do the savings add up? 

Whether you’re buying a wind turbine or new windows, most home energy upgrades require spending money now to save money later through reduced energy bills. Some of these projects are big investments, costing thousands or even tens of thousands of dollars.

How it all pencils out will depend on the details of your project, but with the new federal tax credits you can count on getting some money back quickly. The tax credits for energy efficiency cover up to 10 percent of many home improvements, up to a total of about $500. Even better, the new tax credits cover 30 percent of the cost of most new renewable energy systems — which can add up to thousands of dollars. For example, the maximum tax credit for installing a wind turbine is $4,000.

Does any of this sound familiar? 

No, it’s not déjà vu — you probably have heard all of this before. A similar group of tax credits went into effect in 2006. (You can read our earlier articles about those tax credits here and here.) But most homeowner incentives for energy efficiency expired at the end of 2007, and the tax credits for installing solar energy systems were due to expire at the end of 2008.

Then in October, these new tax credits passed as part of the economic bailout package. So now the tax credits for efficiency are back, the solar tax credits have been extended, and in a few cases, these incentives have been expanded. They all go into effect Jan. 1, 2009.