Monday, April 19, 2010

TRUE COST OF ENCAPSULATING YOUR CRAWL SPACE

I was looking at some recently updated figures on utility costs this morning and was struck by how cheap it really is to encapsulate your crawl space – especially when the true after-tax cost and the utility savings are factored into the crawl space encapsulation.

The cost of floor and wall material to encapsulate a 1,500 square foot crawl space averages about $1,500. As part of the American Recovery and Reinvestment Act, a tax credit equal to 30% of the cost of improvements designed for the specific purpose of making their homes more energy efficient is available to homeowners. On a $1,500 investment, the potential tax credit amounts to $450. That is a credit, not a deduction, so it reduces taxes on a dollar-for-dollar basis regardless of the tax bracket.

I am no tax expert and I give no tax advice. The Economic Recovery and Reinvestment Act states that a 30% tax credit is available for improvements or systems whose primary purpose is to lower energy consumption. The purpose of encapsulating your crawl space is threefold. First, it makes your house a healthier place to live. Second, it helps prevent structural damage to the largest investment most Americans make, their home. And finally, encapsulating your crawl space results in greater energy efficiency and utility savings.

The US Department of Energy on its web site www.energysavers.gov states that “To effectively insulate your crawl space for energy efficiency…you need to control moisture in your crawl space.” It goes on to say, “Properly controlling moisture in your home will improve the effectiveness of your air sealing and insulation efforts…moisture control contributes to a home’s overall energy efficiency.” So one of the primary purposes of encapsulating your crawl space is to make your home more energy efficient and save on monthly utility bills. It seems to me that the purchase of materials used to encapsulate your crawl space would qualify for the credit under the Economic Recovery and Reinvestment Act. If the tax credit is a factor in making the decision to encapsulate your crawl space, consult your tax advisor first.

According to the most recent figures I can find, in my part of the world, coastal South Carolina, over a year the average monthly power bill runs a little less than $125 per month. Studies by independent non-profit research laboratories have shown that it is not unusual to see energy savings of 18% after you encapsulate your crawl space or $22.50 average savings per month.

Returning to the 1,500 square foot crawl illustration. Let’s say our ground material, wall material, and installation materials for this space cost $1,500. If 30% of the cost qualified for a tax credit, $450 would be saved almost immediately. Furthermore, the utility saving would be immediate, resulting in a monthly savings of utility savings of $22.50 or an annual savings of $270. That’s a return on the $1,500 investment of 18%. Not bad! Assuming the $1,500 would qualify for the 30% tax credit, the total investment to encapsulate the crawl space would be paid for in less than four years. And with a twenty-five year warranty, the investment should continue paying dividends for years. Not a bad return. I wish I could do that well in the stock market.

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