Tax credits of up to $ 500 are available for a number of types of home improvements that increase a home’s energy efficiency thanks to the Energy Policy Act of 2005.
A tax credit reduces the tax itself (unlike a deduction, which cuts the amount of income subject to tax ).
The credits apply to improvements made from Jan. 1, 2006, through Dec. 31, 2007. The IRS has provided guidance for consumers, but its final rules determining what qualifies for the credits and the specifications they must meet are under development.
Products covered will include windows and doors, roofing, insulation, central heating and air conditioning and water heaters. The maximum home owner credit for all improvements combined is $ 500 during the two-year period.
Tax credits for hybrid gasoline-electric, diesel, battery-electric, alternative fuel and fuel-cell vehicles placed in service starting Jan. 1 will also be available. The amount will be based on a formula including vehicle weight, technology, fuel economy compared to base year models and other factors.
Qualified solar water heating and photovoltaic systems placed in service in 2006 and 2007 can receive a tax credit for 30 percent of the system, up to $ 2, 000. This credit isn’t limited to the $ 500 home improvement cap. Fuel-cell and microturbine systems also are included.
A resource on tax credits is at www. energystar. gov. Search for “tax credits.”
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