Article on energy savings and your pocket book.

1. Energy and cost saving opportunities Along with a mortgage and taxes, another common ongoing expense tied to owning a home is the cost of energy – heating, cooling and electrical power. That expense can become more significant over time if, as many expect, energy costs rise in the future. Thanks to this year’s American Recovery and Reinvestment Act, homeowners have the opportunity to reduce the net cost of investments in energy-efficient home improvements. The result for many homeowners is that the “payback period,” the amount of time it takes to recoup the investment in home improvements related to long-term energy savings, can be shortened considerably. Many of the incentives from the newly enacted legislation are in the form of tax credits based on the investment you make in energy-saving home improvements. This is generally considered the most valuable form of a tax break, as each dollar of tax credit reduces your tax bill for the year by the same amount. Credits for common home improvements A number of home improvement incentives relate to more affordable and somewhat typical improvements that homeowners may make. This includes the installation of energy-efficient windows and doors, including exterior windows and skylights, storm windows, exterior doors and storm doors. Other qualifying improvements include insulation and certain types of metal and asphalt roofs. New air conditioning and heating equipment that meet government specifications can also qualify for the tax credit as do energy-efficient water heaters. Credits for these types of improvements apply to existing homes. If you have already made these improvements since Jan. 1, 2009, you will be able to claim the credit on your 2009 tax return (filed by April 15, 2010, for most taxpayers). The maximum $1,500 credit for all of these types of improvements is generally 30 percent of the cost and applies to any qualifying improvements put into service by Dec. 31, 2010. Renewable energy tax credits Some improvements require a much more significant investment for instance, revamping a home’s heating and cooling system or energy source. Provisions of the American Recovery and Reinvestment Act allow a full 30 percent tax credit, except for fuel cell property, for the installation of renewable energy systems that can dramatically reduce the use of traditional energy sources. Note that the tax credit for renewable energy improvements applies to both existing homes as well as new construction. Credits are included for the installation of solar energy systems. Homeowners who choose to install solar electric systems or a solar water heater can qualify. Also included in the tax credit program are residential wind-power systems, geothermal heat pumps and residential fuel cell and property. Under this program, qualifying renewable systems must be placed in service before 2017. Be clear on meeting specifications All qualifying home improvements and installations must meet certain specifications, many tied to the government’s ENERGY STAR criteria. If you are working with contractors, make certain they can verify that purchased products qualify for the tax credit by providing you with a Manufacturer’s Certification Statement. You can find more specifics about qualifying products at the government’s official Web site, energystar.gov (click on the link to Tax Credits.) Be sure to consult your tax advisor for more information about how your home improvements may affect your taxes. Your financial advisor can help you establish a budget and advice for managing your mortgage and expenses. Daniel J. Lensing, CPRC® Financial Advisor Business Financial Advisor Ameriprise Finanical Services, inc. 14755 No. Outer 40, Suite 500 Chesterfield, MO 63017 Tel: 636-534-2097 This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial. Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC. © 2009 Ameriprise Financial, Inc. All rights reserved. File # 85929 7/09