Renovation loans can provide financing for energy efficient improvements, which under the American Reinvestment and Recovery Act of 2009 could qualify for a federal tax credit equal to 30% of the cost of the improvements. There are two types of renovation credits:
Energy Efficient Projects:
The tax credit is limited to $1,500 per home (or $5,000 purchases); unused credit doesn't "carry over". If tax liability is less than $1,500, the unused tax credit is not "refunded". All renovation projects must have qualifiying products placed into service prior to December 31, 2010.Not all EnergyStar products qualify. The list of qualifying products is not limited to but includes:
- windows and doors are most common renovation projects
- some gas or propane water heaters qualify
- certain roofs could qualify for tax credit
- some insulation products qualify for tax credit
Alternative and Renewable Energy Systems:
This credit has no upper limit and may be carried over into subsequent tax years through 2016. A partial list includes:
- solar water heaters
- solar panels (restrictions apply)
- small wind energy systems
- geothermal heat pumps
Renovation loans, specifically designed for financing energy efficient improvements are available through FHA or Fannie Mae. Energy Efficient Mortgages (EEM) allow for loan amounts to exceed the purchase price of the home for certain improvements. Combined with the tax credits, this can make the purchase of a home in need of renovation less costly than purchasing a new home.
You might begin the research for your renovation project by using our EnergyStar Home Energy Yardstick Calculator. Contact us for more information about EEMs.
