- First, insulation is a primary source of energy tax credit savings. Insulation helps prevent thermal transfer and saves money continuously through the reduction in energy costs of major appliances. For the primary credit, the amount in 2009 and 2010 that could be deducted for such improvements was 20 percent of the installation cost, including labor. However, this only applied to certain categories and types of materials, so not all insulation may qualify.
- While insulation may be a big saver since the basement will probably need extensive insulation work to finish it, there are other potential credits for items you may end up adding to your basement. If your basement has windows, you can receive credits for using a qualifying glass product for these windows. The same goes for doors and qualifying HVAC components for larger expenses.
- Certain energy-efficient appliances can also help you save money for your finished basement, if you use the opportunity to make some major changes. For example, you can qualify for a tax credit if you install a solar electric system as part of the basement work (using part of the basement for a holding tank, for example) or if you take the opportunity to install a geothermal heat pump below the basement level.
- Tax credits change often, so you will be limited on when you can qualify for them. The maximum amount for insulation and other materials is $1,500 per homeowner, and was only available in 2009 and 2010, which means you must have completed the work and filed for the credit by that time. For energy-efficient appliances like new heat pumps the due date was set at 2016. State credits may have a variety of extensions and additional bonuses.
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