Energy Incentives

Making energy-conscious purchases will provide tax benefits when it comes time to fill out your tax return.  These credits can provide significant savings by reducing the amount of income tax you pay.  For more information, visit www.irs.gov.

Consumers

• Home Improvements
  Adding insulation systems that reduce heat loss/gain, replacing exterior doors and windows, including skylights, and adding a metal roof that meets Energy Star requirements can really pay off.   This tax credit, up to $500, applies to improvements made after December 31, 2005, and before January 1, 2008.

• Efficient Cars
  Hybrid vehicles are better for the environment, and that's worth rewarding.  Consumers may claim the full amount of the credit up to the end of the first calendar quarter. The credit will be phased out in the second calendar quarter after the manufacturer sells 60,000 hybrid vehicles.

• Solar Panels & Water Heating Systems
  Taxpayers are allowed one credit equal to 30 percent of the qualified investment in a solar panel, up to a maximum credit of $2,000, and another credit for investing in a solar water heating system.  Neither system can be used to heat a pool or hot tub.            

• Fuel Cell Power Plants
  A qualified fuel cell power plant converts fuel into electricity using electrochemical means, has an electricity-only generation efficiency of more than 30 percent, and generates at least 0.5 kilowatts of electricity.  This tax credit covers 30 percent of the purchase price, not to exceed $500 for each .5 kilowatt of capacity.

Home Builders

An eligible contractor who builds a new energy efficient home may qualify for a tax credit of up to $2,000.  The home must achieve 50 percent energy savings on heating and cooling.  At least 1/5 of the energy savings must come from building envelope improvements.  The home qualifies for the credit if:

• It is located in the United States.
• Construction is substantially completed after August 8, 2005.
• It meets statutory energy saving requirements.
• It is acquired from the eligible contractor after December 31, 2005, and before January 1, 2008, for use as a residence.

This credit also applies to contractors of manufactured homes conforming to Federal Manufactured Homes Construction and Safety Standards. 

Commercial Builders

A tax deduction of up to $1.80 per square foot is available for owners/designers of new and existing commercial properties who are saving at least 50 percent on heating and cooling costs.  Partial deductions of up to $0.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems.