Score insulation tax credits while boosting your utility budget

Jeffrey Anderson | Improvement Center Columnist | July 16, 2013

Sometimes it can feel as if there's no way to win when it comes to your monthly budget, especially when your home's utility costs are increasing faster than your paycheck. But there could be a budget-friendly solution that allows you to get your home's energy usage under control by saving money each month and also get dollars back from the federal government for doing it -- kind of like having your cake and eating it, too.

Adding insulation to a home is considered one of the most cost-effective methods for improving energy efficiency. And by upgrading your insulation now, you could be eligible for federal energy tax credits that are in effect until the end of 2013.

How adding insulation can help your budget

How much do you spend every month to heat and cool your home? Regardless of where you happen to live, the temperature extremes the country has been experiencing are more than likely putting a strain on your monthly budget. The rising costs of just about every type of energy mean your utility bills are edging higher every time your HVAC system kicks on.

While you may not be able to do much about the cost of electricity, propane, or natural gas, how much is needed to maintain a comfortable temperature inside your home is within your control. One of the primary factors that determines how much energy your home uses is the R-value of its envelope or shell that separates the interior from the exterior. In most cases, the following components make up your home's outer envelope:

  • the roof system, which consists of the roofing material, sheathing, and attic insulation
  • the exterior wall assembly, which includes the siding, intermediate sheathing, framing, insulation, and inner finish material
  • the basement, crawl space, or slab design that is normally made up of concrete or block and an insulating material

The R-value is a measurement of a material's or assembly's ability to resist the flow of heat. Higher insulation values equal less heat flow out of the house in cold months and into the house in hotter weather, contributing to a more energy-efficient structure. The total R-value of each part of your home's envelope is achieved by adding up the individual R-values of the materials that make up the assemblies. And the one material shared by all three that does the most to protect the inside of your home from outside temperatures -- insulation.

Wade Linton of Southland Insulators in Fredericksburg, Va., says, "If your house hasn't been built recently, there's a pretty good chance that its outer envelope R-values don't meet today's recommendations. And that almost always contributes to higher heating and cooling costs. The good news is that a home's insulation values can usually be upgraded fairly easily and inexpensively."

The experts at Energy Star estimate that a family might be able to reduce their heating and cooling bills up to 20 percent by insulating and sealing their house to today's recommended standards. If that isn't enough to help your monthly budget, add in the federal energy tax credits that are still available.

Federal energy tax credits for insulation

While many of the federal energy tax credits that were around a few years ago have disappeared, the credit for homeowners who upgrade their insulation is still here. However, if you want to take advantage of this great program, time is of the essence -- it is set to expire at the end of 2013. Here are the types of insulation that can qualify:

  • batt
  • blown-in
  • expanding spray
  • rigid board
  • pour-in-place

Materials that are used to air seal homes may also be eligible. These types of products might include the following:

  • weather stripping
  • canned spray foam
  • house wrap
  • caulk specifically designed for air sealing

All insulation materials must have a Manufacturer's Certification Statement that they meet the standards defined by the 2009 International Energy Conservation Code (IECC) to qualify for the program.

The tax credit you may be eligible for is 10 percent of the insulation's cost, up to a total of $500. The credit is only for the material and does not cover installation labor costs. The structure must be an existing home -- new construction is not eligible -- and be your principal residence. If you have received energy tax credits previously, they may affect the amount you can claim this year. Check with your accountant or tax expert before using the credit for 2013.

Applying for the energy tax credit can be done by filling out federal Form 5695 and placing the amount for which you are eligible on your 2013 1040 tax form. Make sure you keep all material receipts and Manufacturer's Certification Statements for your personal records.

Upgrading your home's insulation can be a great way to help out your monthly budget -- and if you're eligible for them, think of the federal energy tax credits as icing on that cake.

About the Author

Jeffrey Anderson has a Degree in English from V.M.I., and served as an officer in the Marine Corps. He worked in Residential and Commercial construction management for 25 years before retiring to write full time. He spends his time writing, remodeling his old farmhouse, and in animal rescue.