Rebates and Incentives are Free Money!!
What are Rebates and Incentives?
Rebates and incentives are financing tools available to all U.S. homeowners to help offset the costs of and promote the adoption of energy efficiency home improvements. They come in a variety of flavors and types, but they all serve the same purpose – they reduce the price you pay for certain home improvements. In many cases, such as installing solar panels, the rebates and incentives are so high that you may end up saving nearly 50% on your system. A system that normally costs $30,000 may end up costing you $15,000 out of pocket.
What is the Difference Between a Rebate and an Incentive?
In the energy efficiency world, an incentive often means a tax incentive or tax credit whereas rebates typically refer to a simple cash-back discount.
Tax Credits v. Rebates
A tax credit is basically a partial payment on your behalf for taxes due. Federal tax credits apply to everyone in the United States, whereas state tax credits apply only to residents of the applicable state.
Rebates, on the other hand, are cash that is actually paid back to you as a result of you either paying too much in taxes or as an incentive to buy a product.
How do they work together?
To better understand the difference between tax credits and rebates, let’s take the example of a solar system installed in California. Most homeowners in California will be able to take advantage of a federal tax credit given by the U.S. government and a rebate given by the State of California. The tax credit is equal to 30% of the cost of the solar system that you buy. As a result, you will be able to take that amount and simply deduct it from the amount of taxes that you owe. Also in California, there is a rebate which is simply a check based on the size of your solar system (technically it’s calculated based on the amount of energy your system produces). As an example, if you pay $20,000 for your system in 2010, then you can expect to pay approximately $6,000 less in federal taxes as well as receive a check from California for purchasing that solar system.
Types of Rebates and Incentives
There are a number of different types of rebates and incentives that apply to energy efficiency home improvements. Unfortunately, things get a little complicated because rebates and incentives vary by product (i.e., solar system rebates and incentives are different from programmable thermostat rebates and incentives) and they change quite often. Regardless, below are some of the most common types of rebates and incentives:
Tax Credits
With federal tax credits, you receive some percentage or amount of your purchase back in the form of a reduced federal income tax liability. This amount is dependent on what type of energy efficient product you purchase but is eligible to all U.S. citizens.
With state tax credits, you receive some percentage or amount of your purchase back in the form of a reduced state income tax liability. Again, these amounts are determine by what you purchase but also where you live as they vary from state to state.
Rebates
In addition to tax incentives, the U.S. government, some states, and some municipalities offer rebates for energy efficient purchases where they will actually pay you some amount of cash back based on your purchase.
Many local utility companies also offer rebate programs where you receive cash back from your utility company for switching to or buying an energy efficient product that they sponsor.
Lastly, there are manufacturer rebates where you actually receive cash back from the manufacturer for purchasing their product.
Why are There Rebates and Incentives?
You may be asking yourself why our government is giving away money to help you make energy efficiency home improvements. The answer is complex and involves government policies, foreign relations and a variety of other factors. As far as we can tell, there are two likely reasons:
1. The government wants to promote improved energy efficiency throughout society as it will give homeowners a better quality of life and provide significant savings over time. Consider the rebates and incentives a little nudge of encouragement to help homeowners take action and realize the benefits.
2. By promoting energy efficiency, this may improve economical and political stability by reducing our dependence on foreign sources of energy.
Regardless of the reasons, the old idiom “don’t look a gift horse in the mouth” makes a whole lot of sense in the world of energy efficiency rebates and incentives. There is a plethora of tax incentives and rebates for us to take advantage of and they may not be around forever...so act now!
Who Gets Rebates and Incentives?
Nearly everyone! If you are considering any form of energy efficiency home improvements, chances are that you will get some form of rebate and/or incentives. The most comprehensive rebates and incentives database that we know of can be found at www.dsireusa.org. DSIRE is a comprehensive source of information on state, local, utility and federal incentives and policies that promote renewable energy and energy efficiency. Established in 1995 and funded by the U.S. Department of Energy, DSIRE is an ongoing project of the N.C. Solar Center and the Interstate Renewable Energy Council. Before you buy any energy efficient product, check with DSIRE to see if there is a tax incentive or rebate that you can take advantage of.
