Although most people are aware that environmentally friendly homes save money on utility bills, many aren't aware of the tax credits and incentives that can reduce the out-of-pocket expense of making necessary renovations. So what precisely is a green home, and most interestingly, how can you pay for it?

Eco-Friendly Remodeling Green Home

Green Homes is Conservation

A "green home" is one that is constructed or renovated in such a way as to reduce its environmental impact in terms of energy and water consumption, as well as those of indoor air quality, material consumption, and waste. This definition is generally followed by the many different rating systems available today (such as LEED, EarthCraft, Built Green, and Energy Star(c) Homes). A green home has better indoor air quality for the health of its occupants, greater comfort due to more consistent temperatures throughout the year, a smaller carbon footprint, and a higher resale value. There are many financial incentives to go green, but it's important to note that these incentives apply differently to installing renewable "clean energy" technology to produce your own energy versus performing energy saving measures (where your home still uses traditional fuel sources, but LESS of them)

Green Homes is Cost Savings

The "payback period," or the length of time it takes for the savings to compensate for the project's initial cost, is the standard metric used to defend the expense of installing environmentally friendly features. If you compare the price of a generic LED light bulb (which might cost around $10) to that of an incandescent bulb (which might cost around $0.50), you'll see that the former has a payback period of around six months (with annual energy costs of $0.44 vs. $19.70).

That's just one way in which eco-friendly renovations can help you save money, whether you plan to stay in your house for a while or sell it soon. What method do you use to pay for them? It has been discovered that numerous discounts, grants, and other options are accessible.

Green Homes is Federal Tax Incentives

Government tax credits are one form of financial support available to homeowners who install energy-saving measures. Common rebates cover 10% of the price of energy-saving home improvements like biomass stoves, HVAC systems, insulation, roofs, water heaters, windows, and doors. The incentive can be worth up to $500, but only if the work is finished by December 31, 2013. For energy-saving products like geothermal heat pumps, residential wind turbines, and solar PV hot water heaters and systems, there is a popular incentive that will cover 30% of the cost until the end of 2016. For more details on these federal tax credits, check out Energy Star® and DSIRE (Database of State Incentives for Renewables & Efficiency).

Green Homes is State-Level Incentives

Tax credits, subsidized green mortgage programs, and cash rebates are just some of the state incentives available. Energy Upgrade California, for instance, currently offers a rebate of up to $4,000 based on the total percentage improvement in your home's energy efficiency. New York is another state with numerous green incentives, including a residential solar tax credit and the HEMI - Home Improvement with Energy Star High Efficiency Measure Incentive, which provides rebates of up to $3,000. If you want to know what's offered in your state, check out the handy map on DSIRE.org.

Green Homes is County/City & Utility Company Incentives

The DSIRE website also includes information on the plethora of county and city programs that provide local property tax incentives. Philadelphia, for one, streamlines and reduces the cost of permits for residential solar projects, while Sunset Valley, Texas, offers rebates of up to $2,000 for the installation of solar hot water systems.

There are far too many to list here that can be found through contacting your local utility provider. At least one utility provider in each of the 50 states has a rebate initiative, with the most generous offerings found in Washington, Texas, Oregon, New York, North Carolina, Minnesota, Massachusetts, Indiana, Florida, Colorado, and California. Some examples of these incentive programs are "cash for grass" and other similar initiatives, so be sure to inquire with your local utility about them. Changing grassy areas to rock gardens filled with native and/or adapted plants, installing low-flow shower heads, and sealing draughty windows, attics, and doors are all great ways to reduce one's environmental impact. In addition, utility companies in around 30 states offer homeowner loan programs for energy efficiency renovations. There are utility companies in around 20 states that offer home performance-based incentives, which pay out more money once certain conservation targets are met.

So, why hold off?

Since green building standards are rapidly changing and becoming standard practice in the real estate industry, I argue that there is really no longer any excuse for not upgrading your home with all the incentives and programs out there now.

An audit is the first step in most existing-home retrofits; it provides a personalized report detailing the home's strengths and weaknesses and a list of recommended work that can be done to increase its efficiency. Next, consult with a reliable green contractor (usually referred to by the aforementioned programs) to determine which projects will yield the greatest return on investment. Depending on your financial situation, you may opt to do only the work that will be subsidized or rebated, or you may decide to pay cash for additional renovations if the payback periods are reasonable to you, which is often possible with low-interest loans.

Advantages for Home Sellers

More and more homeowners are trying to find energy efficient homes as a result of rising energy costs. Keep copies of your utility bills from before the retrofit so you can show prospective buyers how much money they can save by purchasing your home. If you make a number of eco-friendly upgrades, you may also want to have your house certified as meeting one of the many green home standards available. Find out what incentives your state, county, and utility providers offer for going green in your home, figure out how long it will take to recoup your investment, and get started today!