As a follow-up to the popularity of the “Cash for Clunkers” program, the federal government recently launched the Cash for Caulkers program as an incentive for homeowners to fix or update their homes for increased energy efficiency. This program offers a 30% tax credit, up to $1500 per household, on the cost of (in most cases, only) the materials needed to make the fix, not the entire cost of the project. As most of us know, labor costs account for a large portion of any home maintenance or remodeling project. So, while the cause is noble, there are certainly some major limits for most homeowners.
Let’s take the issue of caulk, the namesake of the program. Almost any home can be re-caulked with a case of caulking which can be purchased for about $100. That’s about a $30 tax credit. Yet if you wanted to hire someone to take care of the project for you, regardless of the labor cost, you’re still only looking at a $30 tax credit even though you may have spent hundreds of dollars for labor. We’re not completely criticizing the program here, but this example shows the limitations homeowners will face that they may not be aware of.
Below is a breakdown of what the 30% tax credit (again, up to $1500 per household) can be used for. These items do not include installation costs and are only included if they meet the efficiency standards set forth by the IRS:
- Windows, doors, skylights, and some storm windows and doors
- Insulation
- Caulking
- Weather Stripping
- Some metal and special heat reflecting asphalt shingles
There are, however, some high ticket items for which installation costs are included:
- Traditional, highly efficient HVAC systems that meet the energy requirements
And more, even higher ticket items which have no limit on the 30% tax credit:
- Geothermal heat pumps
- Wind turbines for residential use
- Solar hot water heaters
- Solar panels
If it costs you, say, $30,000 for one of these expensive items, you get a tax credit of $9,000. The catch is that you have to be able to afford the $30,000 item in the first place – something most homeowners, especially in this economy, aren’t going to be able to do. Perhaps I’m in a cynical mood, but it seems to me that people with money (who can afford such things in the first place) will benefit, whereas the average homeowner may just be able to save a few bucks if he buys his own caulking and installs it himself.
There is one exception, and the best deal for homeowners right now may be in window replacements. Many window companies are selling the windows at an increased amount and providing the installation for free. It’s a matter of just moving the numbers around, but it’s a great way for them to sell more windows and for homeowners to get more of a tax credit while the Cash for Caulkers program is in effect.
Being more energy efficient and going green is always a good thing, and at RIGGS we routinely encourage homeowners to incorporate into their projects whatever level of green they can realistically manage and afford. Saving a few bucks today, and a lot of bucks over the life of the investment is an added bonus.
