Tax Credits for Energy Efficiency in your home

(Last Updated On: February 24, 2016)

Did you know that there is a energy efficient tax credit available to owners of their primary residence?

Energy Efficienct Tax CreditFor Sellers In this competitive market both Realtors and sellers need to make some decisions to make a property more appealing to today’s discerning buyer.  In the end with all things being equal a buyer would want to buy a house with upgrades.  This will give you the opportunity to get your next house faster than would be otherwise be possible.  Estimates vary on the recapture of improvements from 50% to 90%.  With the energy efficient Tax credit can recoup most if not all of the shortfall and you can sell your home faster.

Energy Efficient Tax Credit for existing homes

For existing owners if you bought a foreclosure that’s just a few years behind on the upgrades you can an make those improvements and enjoy savings now .  With energy prices increasing at a rate more than inflation this is a worthwhile investment in your home.

In addition to the Energy Efficient Tax credit you can in some areas of Texas take advantage of deregulated electricity market and the power to choose your provider can result in additional savings.  Many providers are not only giving you lower rates but are offering free electricity and in some cases companies like Ambit are giving away free vacations.  In the end you have to evaluate each providers offerings and if it makes sense for you to switch.

Energey Efficient MortgageIf neither of these options fit your situation many lenders such as ourselves offer Programs from FHA, VA and Conventional sources that allow you to finance 100% the the energy improvements into your loan.  Feel free to call about more details on this option.

In the end using the energy efficient tax credit can make your utility bills take a smaller bite out of your budget or make your more more appealing to a prospective buyer and if you are buying you can make the improvements in AND get a tax credit for them.

The cost of the energy efficient improvements that may be eligible for financing into the mortgage is the lesser of A or B as follows:

A. The dollar amount of cost-effective energy improvements, plus cost of report and inspections, or

B. The lesser of 5% of:

  • The value of the property, or
  • 115% of the median area price of a single family dwelling, or
  • 150% of the conforming Freddie Mac limit.
 - To be eligible for inclusion in the mortgage, the energy efficient improvements must be cost effective, meaning that the total cost of the improvements is less than the total present value of the energy saved over the useful life of the energy improvement.
 - The cost of the energy improvements and estimate of the energy savings must be determined by a home energy rating report that is prepared by an energy consultant using a Home Energy Rating System (HERS). The cost of the energy rating report and inspections may be financed as part of the cost effective energy package.
 - The energy improvements are installed after the loan closes. The lender will place the money in an escrow account. The money will be released to the borrower after an inspection verifies that the improvements are installed and the energy savings will be achieved.

Leave a Reply