The Economic Recovery Act of 2009 (“the “American Recovery and Reinvestment Act of 2009”) offers a number of Federal income tax credits to homeowners who update their homes and improve their energy efficiency. These credits are making home remodeling a very attractive proposition in 2009 and 2010. 
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When homeowners spend the time to research the financing options open to them, the state and local rebates and tax credits, and an amazing array of incentives from utility companies, making your home energy efficient seems like a very good idea. Now add to the opportunities to save the fact that the prices of many building materials are at a thirteen year low and the fact that many manufacturers, retailers and contractors are discounting prices, and you have a remodeling opportunity it is hard to resist.
Homeowners should be aware that the limitations that apply to the tax credit they can claim in a single year ($1,500) for exterior siding, windows, insulation, roofing and doors do not apply to many HVAC and water heating systems. In fact, by choosing the right systems for heating, water heating, cooling and ventilation, homeowners can actually recover a surprisingly large portion of the cost. 
Homeowners can claim a tax credit for 30% of the cost of the following items and systems up to the $1,500 per year Contractor Selection Workbook
It is important to shop carefully because not all appliances with the ENERGY STAR label qualify for these credits.
Homeowners can claim a tax credit of 30% without the $1,500 limit for the following:
  1. Geo-Thermal Heat Pumps
  2. Solar Water Heating Systems (subject to several qualifying factors)
  3. Photovoltaic (Solar heating) Systems
  4. Residential Small Wind Energy Systems
  5. Residential Fuel Cell and microturbine systems
Any of these systems must be installed before December 31, 2016 to qualify for the tax credit. Homeowners also must file IRS Tax Form 5695 (2009 version) to claim the credit. 101 Ways to Save Money When by by Dan Fritschen The next step is to do some research on the kinds of special financing options, rebates and tax credits offered by the state or the utility company. For example, a kitchen remodel in Arizona could save 20% or more by taking advantage of Federal tax credits and other rebates, credits and financing options available only to Arizona residents through the State of Arizona or the local utility company. The new windows, doors, roofing materials and insulation materials would probably earn the maximum Federal Recovery Act tax credit (on Federal income tax) of $1,500. If you live in an area served by the Salt River Project and you decide to install a photovoltaic system and a separate PV solar water heater for your kitchen with “EarthWise Solar Energy” you would qualify for an incentive of $3 per watt DC, with a maximum payment of $60,000 per system for the PV system and an incentive of $0.50/kilowatt-hour (kWh) of first-year energy production for the PV solar water heater. Your photovoltaic system should also qualify for a Federal tax credit of 30% of the purchase and installation cost. (Note: APS also offers similar and other programs.)
Additional information about these programs and about programs in other states is available at

To get online remodeling cost estimates and more information on the benefits of the Economic Recovery Act for home remodeling, visit When you also add the money saved through energy efficiency, these heating and cooling system tax credits total up to big savings.

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