The Energy Tax Incentives Act of 2005 created for two tax credits for residential energy improvements and equipment.
1) A credit for energy saving items used in your principal personal residence of up to a $500.00 lifetime maximum for 10% of the cost of qualified energy efficiency improvements to an existing home, such as -
· Insulation materials
· Exterior windows, including skylights
· Exterior doors,
· Metal roofs with special heat-reduction pigment coatings
Plus 100% of the cost of "qualified residential energy property", such as -
· Electric heat pump water heaters
· Electric and geothermal heat pumps
· Central air conditioners
· Natural gas, propane, or oil water heaters or furnaces
· Hot water boilers
· Advanced main air circulating fans
The lifetime maximum $500.00 credit is subject to the following specific credit limit amounts:
· Window components = $200.00
· Advanced main air circulating fan = $50.00
· Qualified natural gas, propane, or oil furnace or hot water boiler = $150.00
· Energy-efficient building property = $300.00
As the credit is limited to a total of $500.00 for 2006 and 2007, if you have already taken the maximum $500.00 credit on your 2006 Form 1040 you cannot claim a credit for the above items for 2007. If you claimed $300.00 in 2006 you can still claim up to $200.00 in 2007.
2) A credit for 30% of the cost of
· qualified solar water-heating equipment (maximum $2,000.00),
· qualified electricity-generating solar photo-voltaic property (maximum $2,000.00), and
· qualified fuel-cell property (maximum $500.00 for each .5 kilowatt of capacity).
The credit applies only to equipment used in a personal residence (including a vacation property) in the US, with fuel-cell property further restricted to a principal personal residence, and cannot be claimed on equipment used to heat a swimming pool or hot tub.
When purchasing an item or improvement that qualifies for the residential energy credit you should receive a manufacturer’s certification from the seller. Save this certificate and give it to your tax preparer with your 2007 “stuff”.
For more detailed information on what qualifies for the credit go to the Energy Star website.
FYI, the credit for purchase of a qualified “hybrid” automobile is available through December 31, 2009. However, if you are considering purchasing a hybrid you should know that the credit will be lost if you are a victim of the dreaded Alternative Minimum Tax (AMT). See my December 2006 posting on “The AMT and the Energy Credit for Hybrid Vehicles”.