Home Improvements & Energy Credits

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.

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