45L Tax Credit: Overview and Analysis of the Residential Efficiency Energy
Homeowners more than ever are looking for ways to decrease their carbon output and save money. New technologies and new discoveries have hastened the process of creating a better atmosphere for families to live and work in. For many first-time homeowners, the process of looking for ways to be more energy efficient can be daunting if they are planning to purchase an older home. Newly constructed homes, however, take into account the newer technology and materials developed to reduce energy emissions.
Economic incentives to modernize existing energy resources and invest in modern technologies have been on the books for awhile. Current laws provide tax credits for individuals that invest in these newer technologies within their residences. These energy efficient improvements are specially designed to reduce the dependence on fossil fuels and other non-renewable resources.
Benefits of an energy efficient home
According to the Alliance to Save Energy, saving energy makes economic and environmental sense. Homeowners who install energy saving appliances can save up to $1,000 a year in energy costs. Cutting down on power consumption can also affect your environment positively.
The Department of Energy suggests that anyone contemplating either building a new home or doing a major remodeling of an existing home utilizes the “whole house systems approach.” Homeowners who adapt to this concept have a better chance of getting energy efficient certification and qualifying to claim the 45L tax credit.
45L Tax Credit Qualifications
Under this tax credit, the homeowner may request credits for new energy efficient systems and installations performed by a certified contractor between August 5, 2005 and December 31, 2016.
Homeowners should acquire an energy efficiency overview of their current energy consumption before having a tax credit analysis to see if they qualify for 45L tax credit.
Homeowners who are not eligible for the 45L tax credit may still be entitled to residential energy efficiency tax credits under the Residential Energy Efficiency Property Credit.
To claim the 45L Tax credit, the property in question must meet the following criteria:
- Built between August 5, 2005 and December 31, 2016
- Constructed in the United States
- Meets energy savings requirements outlined in 45L code for reducing energy usage by 50 percent
Properties that undergo major rehabilitation and new construction can qualify for 45L tax credit if they pass the energy audit and get certified as energy efficient.
Other requirements to be eligible for the 45L Tax Credit:
- The residence must be a dwelling unit
- The qualified contractor must own the property in question or leases the property
Criteria for an energy efficient home
The Department of Energy performs an energy efficiency overview by utilizing a “Home Energy Score” to determine the current energy consumption and where improvements are needed. With their whole house system approach, the focus is on the appliances, insulation, lighting, heating, cooling, water heating, windows, doors, and sky lighting.
A household’s energy efficiency is measured based on how much energy is produced to heat or cool the residence and how much energy is expended to run appliances and lighting.
One of the first steps to take towards creating an energy efficient home is replacing old appliances that don’t have the Energy Star label on them. You could either transfer them to your garage and secure the garage with lockout tagout locks, or you could just salvage them. The label provides information on how much energy is used up to run the device, thereby, helping you make wise decisions on energy usage.
Heating and Cooling Systems
A few energy efficient heating and cooling systems for your home are currently available nowadays. Residences that utilize a geothermal heat pump stand to gain the most in energy efficiency. Heat pumps also direct more energy and consume less energy than furnaces and boilers.
Infrastructure-Windows, Doors, Roofs, and more
One of the best ways to conserve energy and create a more energy efficient home is to install energy efficient doors and windows with quality materials. Cool roofs can reduce and eliminate heat, and keep houses cool during the hot summer months. Insulating your attic will reduce energy waste and keep your home more comfortable during the cold winter months.
Walls and other structural areas also need attention to minimize or eliminate leaks. Properly insulated walls and floors that repel moisture are more energy efficient and environmentally sound.
Utilities-Electricity and Water
An energy efficient home results to significant energy savings in both electricity and water usage. It is important to note that there are alternatives to utilizing fossil fuels for electricity needs. Solar energy, for example, can provide power to some household appliances and lighting fixtures. There is also wind energy that can power homes and meet electrical needs.
Water conservation is critical in any energy efficient home especially in areas that are experiencing drought conditions. Appliances that use less water, water pump irrigation systems, and inexpensive shower heads can all contribute to an energy efficient home.
As newer technology develops to conserve energy, smarter and more energy efficient homes will be in the forefront. Homeowners are encouraged to take advantage of these innovations in energy efficiency. The benefits of having an energy efficient home outweigh the costs often associated with new construction.
Financial incentives for being more energy efficient
Homeowners have more to gain financially by making wise investments. Solar panels, for example, will pay for themselves in three to five years in producing electricity without the need to be hooked up to the power grid. In some cases, the electric company will pay you for the extra energy you produced through the solar panels.
Utilizing energy-efficient appliances can save homeowners in energy consumption costs which make them a wise investment for years to come.
Water consumption is another concern for many homeowners. Nevertheless, you can reduce your water bills by using energy efficient washers and other appliances.
Environmental incentives for being more energy efficient
In addition to saving money, homeowners contribute to conserving the environment for future generations. Using energy efficient appliances, utilizing different methods of producing energy, and providing a clean environment are all part of making a difference in the world today.
Reduced air pollution is reason enough to invest in environmentally friendly appliances.
Analysis of an energy efficient home
There are a few factors to consider when doing an analysis of an energy efficient living environment. First, consider the size of the home and how much space is involved in heating and cooling it. Second, consider the climate and location of the home. Finally, take into account the natural materials you have in place.