ENERGY-RELATED TAX BREAKS
My wife and I saw our energy costs skyrocket last year. Are there any tax breaks we could benefit from if we decide to make our home more energy-efficient?
Congress was paying attention to the high oil and natural gas prices in 2005 and passed quite a few new incentives for taxpayers to make their homes more energy efficient in 2006 and 2007. The good news for taxpayers is that these incentives are tax credits, which of course, are more valuable than tax deductions. Plus, the energy tax credits aren’t phased out for high-income individuals.
The tax credits reward taxpayers with a 30 percent credit for the purchase and installation of solar-energy equipment or solar water-heating equipment. Each credit maxes out at $2,000 per tax year. There is also a 30 percent credit for taxpayers who purchase fuel-cell property. Taxpayers who install or make energy-saving improvements like installing energy-efficient insulation, exterior doors, and windows, or metal roofs coated to reduce heat gain to their principal residences also are eligible for a tax credit of up to $500. All of the credits are nonrefundable, but can be carried over to the next tax year.
My friend suggested I buy a hybrid car to save on gasoline bills. What type of tax benefit would be available to me?
Hybrid car purchasers are now eligible for a tax credit, replacing the $2,000 deduction from previous years. Called the “Alternative Motor Vehicle Credit,” the credit rewards taxpayers who purchase new cars and trucks that the IRS has certified for the credit. The IRS will make certifications based on the fuel economy and energy efficiency ratings of the automobile.
The estimated tax credit for qualifying cars and trucks purchased and put into service after Jan. 1 will range from $400 to $3,400, depending on the automobile’s fuel economy. What makes this credit different than others is the reduction in the credit’s dollar value once an automobile manufacturer has sold 60,000 qualifying vehicles. The more popular the car or truck, the quicker the credit will be phased out.
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Energy
