Tax returns are a pleasant springtime surprise for many. By cashing in on deductions, one can make that surprise even bigger. One of the deductions to plan for in the upcoming year is the Energy Policy Act of 2005. This plan offers tax credit to those who make improvements in their home's energy efficiency. Plan to make these improvements in the upcoming year and save money on energy AND taxes. Act in the next twelve months; the Act only applies to improvements made before December 31, 2007.
New heating equipment which is energy efficient earns a $150 tax credit.
Structural improvements which create a higher level of efficiency also earn a 10% credit. Added insulation, energy efficient windows and doors, as well as metal roofs can qualify for this credit.
There are several ways to improve the energy use of the home as well as earn this tax credit. Caulk windows and doors and note the cost of such work. Replace the heating system for a more fuel efficient, newer system and/or replace the thermostat for programmable energy efficient one. Replace products such as water heaters and central air conditioners.
Qualifying improvements must have been made between December 31, 2005 and December 31, 2007. If a tax credit was granted for the tax year 2006, another credit can be awarded in 2007. However, the total amount of credit for both years is a maximum of $500.
Of the maximum credit amount, only $200 can be applied to the cost of new windows. When replacing a water heater, a maximum credit of $300 can be claimed. Likewise, a new heating system claims a maximum of $150.
All improvements must have a lifespan of at least five years. Temporary efficiency improvements do not qualify.
For more information about the Energy Policy Act of 2005 look at http://www.energystar.gov/index.cfm?c=products.pr_tax_credits
This site provides excellent, easy to understand specifications for these tax credits.
No matter what tax credit, the energy savings are worth the investment in most cases. While you may earn an extra $500 on your tax return next year, you can also save 10% or more on your energy bills.
on another note..remember that everyone qualifies for a tax credit on your phone bill this is for all the years we have paid taxes on the spanish american war. the credit can vary from$30-$60
I think it's a good idea to take a tax credit if it is available to you, but does it really make sense to spend thousands of dollars on home improvement just to avoid sending the government a few hundred? I mean, if it's time for a new water heater or windows or something, fine, but I have to question the logic of throwing out perfectly good stuff just to get a little tax break.
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