You've probably heard about the government's "Cash for Clunkers" Program, where you could trade in your gas-guzzling old car for a nice rebate toward a more efficient, new set of wheels. Now there's a new program: you can trade in your old appliance for a new one and get cash in return. But how much do you really save, and is it worth it? Here are seven facts you should know before buying that new fridge or washing machine.

  1. Many Appliances Are Eligible
    Think this program is just for dishwashers and fridges? Think again; you could upgrade your air conditioning system or water heater too, which are major energy hogs if they're dated models. Rebates vary by state, but the Department of Energy (DOE) lists recommended appliances as follows: boilers and water heaters, central and room air conditioners, washing machines, freezers and refrigerators, furnaces and heat pumps, and dishwashers too.

  2. You Must Replace An Old Appliance
    You new home buyers are out of luck: this program only applies if you're replacing an old (energy-sucking) appliance. You'll have to surrender that old fridge if you want to get the rebate for a new one, so don't go giving it to Goodwill!

  3. The Replacing Appliance Must Be Energy Star Qualified
    This rule seems like an easy one, but make sure that the new appliance is Energy Star Qualified. There will be a logo on the appliance, and you should be able to tell exactly how much energy it uses per year, including the cost.

    Think these Energy Star Qualified appliances are pricey? Think again; manufacturers have realized (especially with this attractive rebate) that consumers are looking for more energy efficient fridges and dishwashers, which means they're more common now and less expense.

    A basic fridge/freezer for instance is often only about $50 more if you want it to be Energy Star qualified and remember, you'll earn this money back in saved electricity. (Find out how to reduce your costs with these inexpensive tips in 6 Ways To Save On Your Utility Bill.)

  4. The State Pays (And Sometimes The IRS, Too)
    Although this rebate is funded by the federal government through the American Recovery and Reinvestment Act of 2009, your rebate will actually come from your state. Each state gets an allocated lump sum to pay your rebate. Once you buy your appliance, you'll have to mail in a form and proof of purchase. The rules are different for each state, so check the U.S. Department of Energy's website (http://www.energysavers.gov/) for links to your state's program.

    But the savings don't end there. When it comes time to file your taxes, you can deduct up to $1,500 or 30% of the purchase price from your federal taxes on top of this rebate. This tax deduction ends after 2010 though, so take advantage while you can.

  5. There's Only So Much To Go Around
    Remember that lump sum your state has to pay the rebates with? Once the money runs out, the program is done, so don't procrastinate! These types of incentives tend to get a flood of applicants. Make sure you get your rebate if you decide to replace your old appliance.

  6. Know Your Rebate
    Your state will have a list of rebates and amounts, and so will your local appliance store. Expect to get anywhere from $50 to $250, depending on the appliance. Another little-known rebate can come from your utility company; many utility providers offer $50 to $100 in rebates with proof of purchase. Contact your utility company for more information. (Upgrading household appliances to more energy-efficient models can slash your utilities bill. Learn more in Home Energy Savings Add Up.)

  7. Do The Math: Are You Really Saving?
    Now down to the most important question: how much are you really saving? Here's a quick formula: Purchase price - rebate - energy savings over three years. Three years is respectable amount of time for you to see a benefit. Let's say you're replacing your 1980s fridge with an Energy Star model for $700. Your state gives a rebate of $50, and you save approximately $300 over three years on your electric bill. That means your actual cost, calculating in your three year energy savings and rebate, is $350 - a 50% savings.

    Not bad, and if you have a fridge from the seventies, you'll double your energy savings, making the cost of your new appliance just fifty bucks. If you factor in a possible rebate from your utility company, and a federal tax deduction, your savings are even greater. For more help and a calculator for energy savings, go to Energy Star's website (http://www.energystar.gov/).

The Bottom Line
So is this program worth rushing out and buying a new appliance? It's only really worth it financially if you were planning to anyway, since it will take you a while to recoup your cost. But if reducing your impact on the environment is important to you as well as the savings, this program may be for you. If you're thinking of taking advantage of these rebates and the tax deduction, don't wait. Once they're gone, don't expect these breaks to return anytime soon.

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