How Much Money Will You Save With Energy Star Appliances?

By , dealnews contributor

Last week, we wrote about the power hogs that hide in your home, trampling all over your wallet while making your carbon footprint way too fat. This week we'll concentrate on how, going forward, you can combat your energy costs by purchasing Energy Star products.

While energy-efficient appliances can save you money through usage, few people realize that you can get a tidy refund via a tax credit (after the proper I.R.S. paperwork), too! And though it's too late to claim such a credit on last year's taxes, you can start planning for a payoff on this year's, by purchasing an Energy Star appliance. Here then is what you need to know about the savings can you expect when it comes to Energy Star products.

What is Energy Star?
A joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy, Energy Star designates energy efficient products and practices. Besides household products and appliances, Energy Star extends its designations into home construction itself, meaning that a new home can earn an Energy Star seal. Thanks to Energy Star, Americans saved enough power in 2010 to prevent greenhouse gas emissions equivalent to those from 33 million cars — all while saving nearly $18 billion on their utility bills.

How Much Money Will Energy Star Appliances Save Me?
The operating costs of many Energy Star appliances are printed on their labels, though it helps to know how much your old appliances used in order to gain a proper perspective. As mentioned last week, old refrigerators are often the biggest energy offenders, wasting up to three times as much energy as new ones. (You can calculate your savings with this refrigerator retirement savings calculator). Of course, Energy Star appliances run the gamut from air conditioners to lawn care tools. There are, of course, general guidelines for how much an Engery Star product can save your household, as compared to a non-Energy Star model.

For perspective, here are some figures from the National Resource Defense Council, courtesy of Replacing a 1980s model refrigerator with, perhaps, this Whirlpool 21.9-Cubic Foot Bottom-Freezer Refrigerator from Abt Electronics ($931 via $50 rebate with $78 s&h, a low by $35) can save you $100 a year in total energy costs. Replacing a pre-1994 clothes washer will save you as much as $110 a year; and a new, Energy Star dishwasher — like the pictured Whirlpool Super Capacity Tall Tub Stainless Steel Built-In Dishwasher ($349.97 with $49 s&h, a low by $5) — will save you about $25 per year. Multiply those savings over an appliance's 20-year lifetime, and you're talking thousands of dollars of potential cost reduction.

How Do Energy Star Tax Credits Work?
Tax credits are still available for consumers who purchased home improvement items in 2011, so if you splurged on some new windows or an air conditioner for the holidays, you're in luck. These tax-deductible goods include biomass stoves; heating, ventilating, and air conditioning; insulation; roofs (Metal & Asphalt); water heaters (non-solar); and windows and doors. The tax credit for these items is, on average, 10% of cost, and up to a cumulative deduction of $500. The tax credit applies only to an existing home or your principal residence; new construction and rentals do not qualify. To apply for the tax credits for 2011 purchases, you'll need to file I.R.S. Form 5695 for Residential Energy Credits, a 5-page attachment that your accountant or tax preparer can fill out easily with the proper receipts and documentation.

What's Changing for the 2012 Tax Year?
Unfortunately, some of the best Energy Star tax credits expired on January 1, 2012, including those that allowed folks to claim up to 30% of improvements like a new roof or hot water heater. However, through December 31, 2016, you'll be able to claim 30% of your costs (with no upper limit) on geothermal heat pumps, small, residential wind turbines, and solar energy systems. Existing homes and new construction qualify, as do principal residences and second homes, though rentals do not. What's more, homeowners can also earn a credit of up to 30% of the cost of residential fuel cells (up to $500 per .5kW of power capacity), through the end of 2016.

If you want to know how much a solar or wind system might cost to install, check out the handy cost estimator at Entering my ZIP code in Cook County, IL, along with some basic information on my electric bill, I learned that a solar system would be a "good" bet based on my area's solar rating, and that the total cost of a system would run about $17,700, after the $7,590 tax credit is applied. That's a large up-front cost, but long-term energy savings can be substantial; with a handy graphic it's estimated that I'd break even in 12 years — and be $20,000 ahead in 24 years.

What's the Bottom Line on Energy Star?
Appliances that earn an Energy Star rating may cost a bit more upfront, but in an overwhelming majority of cases, their operating costs yield big savings over the lifetimes of the products. And while you can't bank on the government bringing back the now-expired 2011 tax credits, anything is possible in an election year, especially when energy costs are an important voter issue. Regardless, the facts show that Energy Star is working for the betterment of the environment while simultaneously lowering electric bills. Even in our fractured political climate, that's a platform everyone can agree upon — and incentive enough for all of us to make some major changes around the house not just in 2012, but also in the years to come as well.

Photo credits top to bottom: CGS Senergy and Window Installation Cincinnati

Lou Carlozo is a dealnews contributing writer. He covers personal finance for Reuters Wealth, and was most recently the managing editor of, and before that a veteran columnist at the Chicago Tribune.

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DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).


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