Making Tax Credits Make Sense

Because They Certainly Don't Make Cents
I spent the past few days wrapping up a sustainability report for a homeowner. Part of that involved some research into incentives, from state to federal. Being that for the majority of my career I have worked in the commercial sector, I needed to learn more about residential credits and incentives. Now, I knew that the tax credits for homeowners for home improvements were pretty paltry, but now that I REALLY know, in reality, they are nothing short of pathetic; they make no sense -or cents, at all.

Take the federal tax credit for window replacement as an example. The windows must be Energy Star qualified or meet IECC (the International Energy Conservation Code). The tax credit? Up to 10 percent of the cost, which at first seems like a great deal. Until you read the next part, that being a maximum cap of $200. Um, I'm sorry, but that credit barely covers the cost of one replacement window -maybe, let alone the installation and labor costs associated with it. My parents replaced the windows in their house 10 years ago, a 2,800 square foot home, at a total cost of $14,500.00. Two hundred dollars doesn't make much of a dent in that, and even a 10 percent credit on that amount is only $1,450.00. I asked them if they saw a drastic decrease in their utility bills as well, and their answer was a small drop, but nothing to jump and down over. And even if the drop was say, $50 each month, that's a payback of 24 years -minus the $200 tax credit. In all seriousness, a homeowner may not fancy that as much of an incentive.

Making Cents
It seems to me, with all our talk of reducing our dependence on foreign resources, and reducing CO2 emissions into our atmosphere, that we would want to make our existing homes more efficient. And in all seriousness, I know that's what we all DO want to do. So, you would think that incentives and tax credits to homeowners undertaking energy efficient improvements would make much more hard economic cents than they do. So why don't they? In addition, a higher tax credit on energy efficient home improvement measures could actually help with stimulate the economy by creating green jobs -or heck, just jobs, green or not. People would want to insulate their homes, want to replace their heating and cooling systems, want to purchase more energy efficient appliances, want to install domestic solar hot water systems, and so forth. And with a tax credit that made cents, it could reduce the payback time to something more viable to any homeowner. Twenty four years for a payback is too long, but 8-10, maybe even less? Now you've got my attention.