What's Next for Home Improvement Tax Credits?

Posted by Woodrow Aames ~ January 2, 2011

Last month, when President Obama signed the $858-billion federal tax bill the provisions included a continuation of tax credits for energy efficient home improvement projects. The bad news is that the amount cuts out two thirds of the total amount from green home remodeling, which may be the kiss of death for encouraging home owners to undertake such projects.

I'm even surer about the urgency with which I wrote about taking advantage of 2010 tax credits last fall when I see the new 2011 dollar-specific limits on the amount you can earn for insulation, windows, doors, roofing products that resist heat gain, green HVAC products, and water systems. In short: it's a pittance.

According to the Los Angeles Times credits for energy efficient windows (just the materials) was slashed to a $200 incentive, as compared with the $1,500 offered through the end of last December. A spokeswoman for the National Association of Home Builders said the legislation "is a big step backward. It's bad for the environment, bad for consumers and, of course, bad for jobs in our industry."

And it's still uncertain about what we'll see in 2011 in terms of independent state green remodeling initiatives.

Now what for homeowners and contractors?

Any chance of further incentives enacted during the 2011 year is less than zero, according to the Times. The ripple effect of the end of real green remodeling incentives can have a wide impact beyond the remodeling industry. With an estimated age of 70 percent of all American homes at 30 years and older, the cut in incentives can be a tragic negative influence on upgrades, meaning higher energy bills for all consumers.

According to Smart Money, the maximum credits available for the same EnergyStar products that qualified last year will amount to $200 for energy efficient doors and windows, $300 for water heaters, and a $300 cap for HVAC components.

What now, building associations wonder, will encourage homeowners to perform home improvement projects? Instead of providing homeowner incentives to seek green solutions and stimulate jobs in the construction and manufacturing business, the new so-called incentives are expected to have little or no effect when the economy needs it most.

I'd call it a catastrophe, wouldn't you?

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