Take advantage of energy tax credits -- while you can
A New England-based company, Sunhouse Energy Center, is so confident of its solar-hot-water and space-heating-control package that it guarantees qualifying homeowners a 50 percent reduction in hot-water and space-heating bills -- or it will pay the difference. Indeed, you will pay for the whole installation in a few years on the money you save. No ``new'' money will be needed whatever, the company says.
While manufacturers in other regions of the country are making similar offers, there is a cloud on this otherwise bright scene. There's a time limit to all these offers: they'll be discontinued at the end of the year when federal tax credits for energy-saving equipment cease.
In 1978, with America facing more long lines at the gas station, Congress introduced tax credits for people who invest in energy-saving measures (insulation, storm windows, and the like) or renewable-energy equipment, such as solar heaters, wind generators, etc.
For the record, a tax credit is far more significant than a tax deduction. Where the money involved in a deduction comes off your earnings before taxes, the tax credit comes directly off the amount you pay Uncle Sam. The effect then is to cut the cost of the installation by whatever percentage the Internal Revenue Service (IRS) allows.
A solar hot-water-heating system that costs, say, $1,500, is allowed a 40 percent federal tax credit. This means the homeowner ends up paying only $900, and even less if his state also offers a tax credit. Many states offer these additional credits so that a system frequently ends up costing the homeowner one-third of its actual sales price.
Renewable-energy tax credits allow you to deduct 40 percent off the cost of the equipment up to $10,000. Systems that qualify include these:
Heating: Solar water heaters, space heaters, thermosiphoning panels, including trombe walls, and geo-thermal (heat from the earth) systems where the source of the heat is in excess of 122 degrees F. (50 degrees C.).
To qualify for the credit a sunroom must be used exclusively for heating the home. It may not be used as a greenhouse or as living space. Generally, active systems (systems with moving parts, such as a fan) are more favorably viewed by the IRS than purely passive systems.
Electricity: Wind generators and photovoltaic panels.
Conservation tax credits allow 15 percent of up to $2,000, spent on insulation, caulking, storm or thermal windows, and setback thermostats, including computers designed to monitor and control energy use. Energy-efficient furnace burners also apply.
In 1984 Congress defeated an attempt to extend the tax credits, but another attempt may be made again this year. The effort to cut the federal deficit, however, virtually guarantees its defeat.
Conservation methods in the industrialized West -- smaller cars, the increased use of wood and coal as fuels, plus solar energy and upgraded insulation in homes and offices -- has had a dramatic impact on world oil supplies.
A temporary glut and slightly falling prices are the result of this cutback on waste, and continued efforts should keep oil prices stable for some years to come. But the inescapable fact is that in the Western world fewer new sources of oil are being found every year (they peaked in 1971 and have been declining by 7 percent annually ever since). Ultimately, heating costs will rise again, making conservation an economic proposition whether tax credits are available or not.
Meanwhile, this year remains the final one in which Americans will be able to buy energy efficiency on the cheap.