States Offer Cash Rebates for Clunker Appliances

Buying a new Energy Star appliance can lower your utility bills and perhaps even earn a cash rebate from your state.

If you replace an old washing machine with a new Energy Star model, you could save as much as $135 per year--plus a rebate from the government. Image: Corbis Photography/Veer

There’s another reason besides saving on utility bills to replace your clunker appliances with energy-efficient models: a cash rebate. States, using up to $300 million in federal funds, are offering rebates on Energy Star-qualified washers, refrigerators, air conditioners, furnaces, and more. A handful of state programs got underway in December 2009; the rest debuted in early 2010.

Typical appliance rebates will range from $50 to $250, though each state sets the specifics of its own program including rebate amounts, claim procedures, who’s eligible, and which appliances qualify. Don’t delay. States have until February 2012 to use up the funds.

Rebates plus energy efficiency equal savings

Funding for the appliance rebates comes from federal efforts to encourage energy efficiency and stimulate consumer spending. States applied to the U.S. Department of Energy to get a share of the money. Check with your state for specifics, including when the rebate program officially begins. Purchases made before the start date generally won’t qualify for rebates.

Swapping out old appliances for new ones is a smart approach to reducing household energy bills. According to the DOE, 70% of a home’s energy consumption goes toward appliances, refrigeration, heating, cooling, and hot water. The latest Energy Star-qualified appliances typically use one-third less energy than outdated models.

The savings can be felt immediately. Trading in a refrigerator manufactured before 1993 will net an annual energy savings of $65, the DOE estimates. Replacing a washing machine made before 2000 with a new Energy Star model can save up to $135 a year. Throw in a rebate, and payback on an investment in a new appliance can come in just a few years.

Let’s say you buy an Energy Star-qualified washing machine for $750, the average price in 2009. Your state offers a $100 rebate on the purchase. Thanks to the $135 you could save annually on utility bills, the payback period could be less than five years. Not bad for an appliance that should last at least a decade.

Appliance rebates vary by state

Before you rush out to your nearest appliance retailer, brush up on the exact terms of your state’s rebate program. Although appliances must be Energy Star-qualified, some states might only give cash back for dishwashers and refrigerators, while others might include high-efficiency furnaces and tankless water heaters as well. Some states require that you trade in an old appliance to get the rebate, while other states make recycling mandatory. Some states even limit rebates to economically disadvantaged households.

If you live in Alabama, for instance, you’ll get a rebate worth between $25 and $150 on qualifying clothes washers, dishwashers, refrigerators, and room air conditioners. The Alabama program is scheduled to begin in April 2010 and expire less than a month later. You’ll need to replace an old appliance to get the rebate.

Starting in March, residents of California can get a $100 rebate on a new clothes washer, a $75 rebate on refrigerators, and a $50 rebate on ACs. Recycling is mandatory. Delaware’s program is underway, and some rebates worth up to $200 are even retroactive. Check the state’s appliance-specific rebate forms for details.

How to claim rebates will vary depending on where you live. Some states like Delaware require use of a mail-in rebate form. Other states are working with appliance retailers to issue rebates at the point of purchase. It’s a good idea to save receipts and the Energy Star product labels that came on your appliances. It shouldn’t take more than an hour or two to research and claim rebates.

Other ways to save on appliances

Although the new rebates are welcome, don’t overlook other existing ways to lower the cost of energy-efficient appliances. Some local utility companies offer rebates to encourage their customers to consume less energy. Call the telephone number or visit the website listed on your monthly bill. Manufacturers and retailers also offer rebates from time to time to entice appliance owners to upgrade. In most cases, you can combine rebates.

In addition to rebates, some states give tax incentives for qualifying energy upgrades. Virginia, for example, lets some taxpayers recover a portion of the sales tax paid on Energy Star appliances.

The IRS offers federal energy tax credits to homeowners for major appliances and equipment ranging from solar water heaters to geothermal heat pumps. A good source of information on rebates and tax incentives is Energy Star’s rebate locator tool.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.