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Energy-Efficient Home Improvements

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Kay M. Anderson CFP® and Judith G. Alexander-Wasley MBA, CFP®

During this unprecedented time of social distancing, we are spending more time in the home with our family. Working from home, teaching our children, and focusing on home improvement projects from our deferred to-do lists, have consumed us. This time has allowed us to re-evaluate our home and create a wish list of updates to address when we feel comfortable welcoming contractors. 

While a wish list may include many items, it may be beneficial to prioritize the list and establish a feasible budget for the planned updates. In some instances, projects may take longer and cost more than the estimate. Initially, determine your goal for the upgrades and ask yourself the following:

  • Are the improvements designed to benefit your family’s needs and lifestyle? 
  • Can you repurpose your living space rather than perform an overhaul? 
  • What is the value of updating the style of the space? 

Additionally, beyond the desire to make improvements to maximize space and aesthetics, are energy-efficient options appropriate. Advancements in technology provide a vast variety of energy-efficient options: 

  • Replacement of high-energy heating systems and appliances:  Homes over 15 years old may benefit from a new air conditioner, furnace, or boiler as heating systems more than 15 to 20 years old are considered inefficient by today’s standards. 
  • On average, home appliances, including clothes washers, dryers, dishwashers, refrigerators, freezers, air purifiers, and humidifiers, account for nearly 20 percent of your home’s total electric bill. By replacing the appliances in your home with ENERGY STAR certified appliances, you are making an investment that will reduce your energy bill for years to come, which is especially important when you recognize that electricity rates are increasing every year. 
  • Installation of energy-efficient windows and doors:  Newer window models do a much better job at keeping the interior temperature regulated by not allowing much hot or cold air to escape. Additionally, windows with wood frames or wood-clad frames offer the best value when it comes to insulation.
  • Install programmable smart thermostats: A minimal cost option that enhances heating and cooling efficiency by allowing homeowners to set climate control for when no one is at home or when everyone is in bed.
  • Install Solar Panels:  Before considering powering your home with solar energy, homeowners should investigate their energy use and consider potential efficiency upgrades. Knowing total electricity usage, and considering low-cost, and easy-to-implement efficiency measures should be considered before choosing solar. 
  • Upgrade Home insulation:  How much insulation does a house truly need? The U.S. Department of Energy has created a fact sheet to help homeowners decide if their insulation is sufficient for their given climate. https://www1.eere.energy.gov/library/pdfs/insulation_fact_sheet.pdf. Newer homes are often well insulated, while houses several decades old, or older, can often benefit from an upgrade.
  • Use of energy-efficient lighting: Saving money on lighting could be as easy as switching to LED or CFL bulbs. New light fixtures can reduce lighting costs, which may account for up to one-third of a home’s overall electricity bill.
  • Maximize the use of natural light: Natural light is another option for reducing reliance on electricity. Aside from adding value to a home, skylights or larger windows can be a great option for cooler climates because they let more direct sunlight into the home’s interior. This increases passive solar gain, adding free natural warmth during the winter.
  • Installation of energy-efficient water heater: Tankless water heaters produce hot water on demand rather than keeping it hot around the clock, thereby using much less energy. Standard water heaters have improved over the past decade in terms of efficiency, so any upgrade will likely result in water and energy savings.

In summary, all of these improvements lead to energy savings, and most will also add value to the home. Homeowners who want to be certain they are not missing any obvious improvements can enlist the help of an efficiency inspector through the preparation of an energy audit.

Incentives for Making Improvements: Residential Renewable Energy Tax Credit

If your home improvements take you down an energy-efficient path, it’s important to know that some equipment qualifies for the Residential Renewable Energy Tax Credit. These include solar, wind, geothermal, and fuel-cell technology.

According to the U.S. Department of Energy, you can claim the Residential Energy Efficiency Property Credit for solar, wind, and geothermal equipment in both your principal residence and a second home. But fuel-cell equipment qualifies only if installed in your principal residence.

Taxpayers who upgrade their homes to make use of renewable energy may be eligible for a tax credit to offset some of the costs. Renewable energy tax credits are available through the end of 2021. Claim the credits by filing Form 5695 with your tax return.

If you have questions on improvements you may be considering, we invite you to contact our office to speak with your financial advisor. 

References:


TurboTax. (n.d.). Energy Tax Credit: Which Home Improvements Qualify? Retrieved from https://turbotax.intuit.com/tax-tips/home-ownership/energy-tax-credit-which-home-improvements-qualify/L5rZH56ex


Federal Income Tax Credits and Other Incentives for Energy Efficiency. (n.d.). Retrieved from https://www.energystar.gov/about/federal_tax_credits


Federal Income Tax Credits and Other Incentives for Energy Efficiency. (n.d.). Retrieved from https://www.energystar.gov/about/federal_tax_credits


Federal Income Tax Credits and Other Incentives for Energy Efficiency. (n.d.). Retrieved from https://www.energystar.gov/about/federal_tax_credits

Federal Income Tax Credits and Other Incentives for Energy Efficiency. (n.d.). Retrieved from https://www.energystar.gov/about/federal_tax_credits

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

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