Itemizing homeowners have some pretty consistent deductions, like mortgage interest, mortgage points, and property taxes. These deductions have been around for more than 100 years.

We also have some on-again, off-again tax benefits, like the energy property tax credit, which Congress lets expire and then sometimes renews and sometimes doesn’t. This credit, for things like energy-efficient HVAC systems, insulation, water heaters, and windows, has changed more times in its short life than Britney Spears during a concert. This tax season is the last you can claim it, unless Congress renews it for 2014, which is possible but not certain.

And that’s too bad, because keeping money in your pocket by reducing your federal tax bill, along with equity growth (which had an 11% gain last year for the average homeowner) are key ways we homeowners build wealth.

Related: How to Claim the Energy Tax Credit on Your 2013 Taxes

How Tax Benefits Add Up

Take a look at the total benefit of the mortgage interest, mortgage points, and property tax deductions. This chart lists what you get to keep from the tax man based on your tax bracket, if you take all three of these benefits.

Tax Bracket You Keep
15% $2,242
25% $3,737
28% $4,185
33% $4,933
35% $5,231
39.6% $5,919

We calculated this using the total median deduction as reported by the IRS for each of the three benefits:

Mortgage interest $10,129
Mortgage points $509
Property taxes $4,309
Total $14,947*

*The deduction isn’t how much you keep in your pocket; it’s how much you get to deduct from your income, or how much income you don’t have to pay income tax on.

So Why Should We Miss the Energy Property Tax Credit?

Because it helps the environment and the economic health of our country. Think about it:

It helps us save energy. The typical American family spends an average of about $2,000 per year on energy, and our homes consume 21% of all the energy our nation uses, according to the U.S. Environmental Protection Agency. Our homes even release more greenhouse gases than our cars.

Homeowners who spend money to improve their home efficiency are rewarded with lower energy bills, but they also help the country by cutting energy demand (and therefore costs), reducing pollution, and creating construction jobs.

Induce purchase

It’s cost effective.
As the National Resource Defense Council notes, “Tax incentives encourage investment in energy-saving opportunities, so energy costs eat up less of a homeowner’s budget.” 

It inspires others. When homeowners install energy-efficiency improvements, there’s a spillover effect. The neighbors see the new technology, hear about lower utility bills, and are inspired to do their own improvements.

Even if you didn’t take the energy property tax credit, chances are you heard about the benefits of air sealing or high-efficiency furnaces simply because having the tax credits available draws media attention to home energy consumption.

How Tax Credits Motivate Homeowners

Granted, there are a lot of relatively inexpensive things — like adding attic insulation and sealing air leaks — you can do to button up your home. But if you want to go further, or if any of your home systems are coming to the end of their useful life, the energy credit serves as a cost helpmate.

For middle-income households — and most homeowners who itemize are middle-income households — a tax credit is the push they need to make energy-efficiency improvements for the sake of energy savings. For lower-income homeowners, a tax credit can be a motivator to buy a more efficient product when replacing broken home systems like furnaces.

A couple of case studies included in an American Council for an Energy-Efficient Economy (ACEEE) white paper show the influence the energy tax credit had on homeowners selecting furnaces and windows.

Case study #1: furnaces.
CenterPoint Energy, a Minnesota natural gas distributor, tracked the choices consumers made when purchasing furnaces:

  • In 2008 when there was no credit, the majority of consumers chose furnaces in the 92% efficiency range.
  • A year later in 2009, you had to buy a 95%+ furnace to get the tax credit, a majority of consumers went with a furnace that was greater than 94% efficient.
  • When CenterPoint surveyed consumers, 37% said the tax credit was the reason they opted for a more efficient furnace.

What’s more, manufacturers responded to the tax credit by offering more efficient furnaces. In 2008, only two primary manufacturers offered 95%+ furnaces; by 2010, all major furnace manufacturers had a qualifiying furnace, according to the ACEEE white paper.

Case study #2: windows.
Before there were tax incentives, about half the windows sold were Energy Star-qualified. When the tax credit was offered, nearly every window sold was Energy Star-qualified. And when the size of the tax credit shrunk, as it did between 2010 and 2011, so did the share of Energy Star windows sold.

Year Tax Credit % Windows Energy Star
2010 $1,500 93%
2011 $500* 89%

*The tax credit was capped at $200 for windows.

Tax Credits vs Discounts and Rebates

A 2011 Texas Tech University study went even further, comparing energy tax credits with rebates and discounts, some of which require more work than others for the payoff. A tax credit requires more effort (a complicated tax form, delayed gratification) than a rebate, which in turn requires more effort than an on-the-spot discount.

The finding: The energy-efficient tax credits have greater influence on purchase when the energy-efficient product is pricier than a not-so-green option. After all, you’re not going to want to deal with the energy tax credit form for a pint-size credit. But when there’s a $1,500 tax credit for buying a more efficient furnace, the form suddenly doesn’t seem like such a pain.

Overall, the study concluded that “energy-efficient tax credits … can induce energy-efficient investment to a greater extent than standard marketing inducements (e.g., rebates and price discounts),” and that tax credits “might be the most effective administrative choice when socially desirable behavior … involves a large price differential.”

The bottom line: The energy tax credit lifts all boats — not just the homeowner’s — by addressing the future of our natural resources. Let’s hope it gets renewed retroactively this year, as it has in the past.

Related: Take Back Your Energy Bills — Energy-Efficiency Measures that Will Work for You