Archive for the 'Tax Planning' Category

Home Improvements & Energy Credits

Sunday, August 27th, 2006

Many Americans improve their homes in the summertime. For 2006 you can add some tax breaks for the right kind of expenses. It’s all part of a large 2005 tax bill aimed at making us more energy conscious. There are two different credits available to homeowners. Note: “Homeowners” means exactly that - these credits are not available for a second residence, summer home, or rental property.

1) Residential Energy Conservation Property. This credit gives you a 10% direct refund for the cost of qualifying property. The credit is in place for 2006 and 2007, but is limited to a lifetime claim of $500. That’s $500 off on the first $5,000 spent.

What qualifies? Insulated windows, skylights, and doors. Any insulation at all. Main air circulating fans, non-electric water heaters, furnaces, and central air conditioning units. There are limitations - no more than $150 credit on a water heater, $200 on skylights, $50 on main air circulating fans, and others. The rules are technical - trust the labels on products at your favorite home improvement store. If you’re going to make a few changes, think energy! The tax savings offer a discount on your costs.

2) Residential Energy Efficiency Property. These credits are larger, but they involve high-ticket items. Key items are solar water heaters (but not for a swimming pool), solar electrical generating devices, and fuel cell plants. For solar water heaters and photo voltaic generators, the credit is 30% of the first $6,667 - a $2,000 maximum. For fuel cell plants, it’s $500 for each 1/2 kilowatt of capacity. No costs relating to swimming pools are allowed - apparently America already has the most energy-efficient swimming pools on earth! Again, the most knowledgeable people will be those selling the products. They’ll have the answers.