The American Recovery and Reinvestment Act has increased the previous tax credit for home improvements from 10 percent to 30 percent of the cost and increased the maximum amount of the credit from $500 to $1,500. This commitment to the promotion of energy efficiency presents a substantial financial incentive to consumers who are interested in weatherizing their homes.
A tax credit is the equivalent of making a partial payment toward the total taxes an individual owes the federal government. Tax credits are deemed more valuable than a tax deduction because they will reduce the actual dollar amount of the taxes owed, whereas a deduction will only reduce a percentage of the taxes an individual owes.
Individuals who purchase and install products including home insulation, heating and cooling equipment, roofing, doors and energy efficient windows will be eligible for this tax break. This energy tax credit can be applied to home improvements that are 'placed into service' (made ready and available for use) during 2009 and 2010. Home improvements that were purchased and installed before 2009 do not qualify. The stimulus bill also extends credits for electricity produced from renewable sources including solar, wind and biomass.
The economic stimulus package also allocates funds toward modernizing the electrical grid, partially through the use of renewable energy resources, and to weatherize federal buildings and low-income households. In the average American home, 50 to 70 percent of the energy used can be attributed to heating and cooling. "USA Insulation is excited about the new tax credit", says Franchise Corporation President Patrick Pitrone, "this is the type of incentive that drives homeowners to think more about energy efficiency."