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Get Help Paying for Home Energy Upgrades

Tax credits and utility rebates can lower the cost of replacement windows, new furnaces and more.

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— Tyrone Turner/National Geographic Society/Corbis

For Mary Jo Love, getting new windows was a no-brainer. After all, Love did an addition on her Mineola, N.Y., home 18 years ago but never got around to installing replacements. What was unexpected, says the 63-year-old retiree, was the $1,500 federal tax credit she received this year for upgrading to energy-efficient windows.

Going green has its environmental benefits, for sure, but the advantages also extend to your pocketbook. New windows or a high-efficiency furnace can cut energy bills, but homeowners also can get a hand paying for such expensive upgrades from a number of sources. If you’re living on a fixed income or in a drafty old house, that kind of financial assistance is too good to pass up.

Federal energy tax credits

Uncle Sam wants you to make your home more energy efficient, and he's willing to put his money where his mouth is. You can earn a federal energy tax credit worth up to $1,500, just as Mary Jo Love did, by making eligible home improvements to your principal residence. Projects that can qualify include upgrading your air-conditioner, furnace, water heater, roof or insulation.

You need to keep a few things in mind. First, only 30 percent of the cost counts toward the tax credit, which maxes out at $1,500. Second, the tax credit is what the Internal Revenue Service calls "nonrefundable," meaning you can't claim more in credits than the total you owe in federal taxes. If you don't file, then you're out of luck. Third, this particular tax credit is scheduled to expire at the end of 2010, so make sure you get the work done by Dec. 31. A separate tax credit for big alternative-energy projects, such as solar panels and geothermal heat pumps, runs through 2016.

State and local incentives

Most state and local governments have programs designed to get homeowners to make energy improvements. Florida's Orange County, for example, offers a rebate worth up to $1,000 to residents who agree to an energy audit and hire a licensed contractor to make the recommended improvements. The catch: Ten or more people must band together to qualify for the rebates. Texas offers loans to help pay for things such as heat pumps, central air-conditioning, weather stripping and insulation. The interest rates on loans range from 0 percent to 6.5 percent.

Some states are still distributing cash to residents who buy energy-efficient appliances during specified periods. For example, the District of Columbia plans to offer between $50 and $75 to residents who upgrade to a qualifying dishwasher. The appliance rebates vary by state, and some states have already spent the allotted funds that were doled out by the U.S. Department of Energy.

Utility rebates

Considering all of the stress on the nation's electric grid, utility companies have an incentive to get customers to make energy-efficiency upgrades. GRU, the municipal utility in Gainesville, Fla., offers rebates between $300 and $550 to customers who install qualifying central air-conditioning units. Call your local utility, or search the Energy Department's Database of State Incentives for Renewables & Efficiency site to find incentives in your area.

Low-income assistance

Households with limited incomes can get help paying heating and cooling bills. The Low-Income Home Energy Assistance Program, known as LIHEAP, funnels federal funds to the state and local levels to help defray utility costs. The Weatherization Assistance Program also passes along funds to help needy families go green at home.

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