Planning a renovation project? Let’s talk about some tax-saving tips that could make your home improvements even more rewarding. Today, we’ll explore both Federal and California-specific incentives that could save you money on your renovation journey.
Federal Energy Efficiency Tax Credits
Residential Renewable Energy Tax Credit.
This credit allows homeowners to claim a portion of the cost of qualifying renewable energy equipment installed in their primary residences. This includes solar panels, solar water heaters, small wind turbines, and geothermal heat pumps. The credit is currently set at 30% of the cost of the equipment and installation, with a gradual reduction over time.
To add some clarity here is a real life example of how this would work. Take, for example, the purchase of a qualifying water heater for $3,500. With the current Federal tax credit set at 30%, you could receive a substantial credit back on your taxes or, per this example, $1,050 back in your pocket.
Residential Energy Efficiency Property Credit
Homeowners may be eligible for a tax credit for certain energy-efficient home improvements, such as qualifying insulation, windows, doors, and roofs. This credit is worth 10% of the cost of eligible improvements, up to $500.
Unfortunately, the Residential Energy Efficient Property Credit of up to $500, isn’t per qualified purchase. It’s a total credit for the year.
Keep that in mind as you plan your projects!
California-Specific Incentives
The California Solar Initiative
While not a tax credit, offers cash rebates to homeowners who install solar electric systems on their properties.
Property Tax Exclusion for Solar Energy Systems
This means that In California, homeowners who install solar energy systems may be eligible for a property tax exclusion. This means that the assessed value of the property will not increase due to the addition of the solar system.
California Energy Commission (CEC) Rebates
The CEC offers various rebates and incentives for energy-efficient home upgrades, including heating and cooling systems, water heaters, insulation, and more. These rebates can help offset the cost of energy-efficient improvements
Property Assessed Clean Energy (PACE) Financing
Property Assessed Clean Energy (PACE) financing programs allow homeowners to finance energy-efficient upgrades through a special assessment on their property taxes. This can help spread out the cost of upgrades over time.
However, you must note that you cannot “double-dip” on the same expenses when claiming these incentives. In other words, you cannot claim the same solar panel system cost for both the CSI cash rebate and the federal renewable energy credit.
So, whether you’re considering solar panels, upgrading your HVAC system, or making other energy-efficient improvements, exploring these tax-saving options can make your renovation project even more rewarding.
Let’s make those renovation dreams a reality while saving some money along the way. As always, if you have questions don’t hesitate to reach out to Paragon today!
