While most of the energy tax breaks signed into law in the summer of 2005 benefit major energy industry players, there are some breaks for us regular folk. These breaks take effect in 2006 and fall into two categories: residential and motor.
Residential Energy Conservation Credits
These credits have to do with what you get to take off your taxes due to your home. Solar powered innovations, such as photovoltaic equipment and solar water heating, can get you a credit equal to 30 percent of your cost, up to $2,000. Additionally, you can get a credit of $500 for each half kilowatt of your fuel cell equipment capacity. Electric or geothermal heat pumps will garner you a credit of up to $300, and a $50 credit comes from an advanced circulation air fan used with a natural gas, oil, or propane furnace.
Home improvement moves to increase your home’s energy efficiency are also encouraged with tax credits. 10 percent of your insulation materials or systems that reduce heat loss is included in the list of credits. Additionally, exterior energy efficient windows and doors can result in a 10 percent of cost tax credit. Even some roofing materials are included. The catch to these small improvements is that your lifetime credit is about $500, $200 of which is allowed for energy efficient windows.
Motor Vehicle Credit
This credit is entirely dependent upon the fuel efficiency of your car. You will have to check at irs.gov to determine how to figure the amount of your credit. But the credit is determined by how heavy your car is and the efficiency of the fuel it achieves. The deal is mainly this: the heavier your car is, the larger your tax break will be.
The rule for hybrids is two part. For a hybrid that weighs up to 8,500 pounds, your maximum tax credit is $3,400. This credit comes from both conservation and fuel economy. However, there are definite limits. The credit starts in January 2006, and phases out over six months. Also, it is limited to 60,000 cars per manufacturer. If you want to take advantage of this, you will have to move quickly.
Finally, there are credits offered for vehicles that use something other than diesel or gasoline. Compressed or liquefied gas and ethanol are two examples. Fuel cell cars are also included in this category. These are very generous credits. For an 8,500 pound car, the credit for alternative fuel is up to $4,000 and for the same car, but running on fuel cells, it is up to $8,000.