Take Credit Where Credit Is Due

Tax credits, unlike tax deductions, are as good as a rebate. They come straight off the bottom line on your return. But you have to know to claim them--and how.  

Here is a summary of credits available for home improvements made — and hybrid vehicles purchased — in 2006 and 2007 and for links to the tax forms you'll need to fill out to claim these credits or find out more information about them.  

And don't forget to share this article with your friend who just finished some home improvements. Until the stroke of midnight on April 17, there's still time!  

Here's a summary of credits available for home improvements made--and hybrid vehicles purchased--in 2006 and 2007. For more information, see the sources listed below. And when you're shopping, remember to ask the manufacturer about products that qualify. 

Cars and light trucks tax credit: $250-$3,400

Requirements: Credits for hybrids and diesel engines are based on a formula that takes vehicle weight, technology, and fuel economy compared to base year models into account. You can get that information from the manufacturer. The credits will be phased out 15 months after a manufacturer sells 60,000 of the qualified models or after 2010, whichever comes first.  

Central Air Conditioning Tax credit: $300

Requirements: For split systems, with a separate indoor and outdoor unit), a Seasonal Energy Efficiency Ratio (SEER--a measurement of performance throughout the season) of 15 and Energy Efficiency Ratio (EER--a measurement of performance on a very hot day) of 12.5. Single package systems, typically on a roof, must have a SEER of 14 and an EER of 12. Note that not all Energy Star-labeled products qualify. 

Doors tax credit: 10 percent of the cost (not including labor), up to $500

Requirements: Meets the International Energy Conservation Code. Energy Star doors qualify, except for in certain parts of California. Some storm doors are also eligible. 

Fans for heating and cooling systems tax credit: $50

      Requirements: Fan uses no more than 2 percent of total heating system energy use.  

Gas, oil, and propane furnaces and boilers tax credit: $150 

      Requirements: Must have an Annual Fuel Use Efficiency (AFUE) of 95 or higher 

Insulation tax credit: 10 percent of the cost, up to $500

      Requirements: Meets the International Energy Conservation Code.  

Metal roofing tax credit: 10 percent of the cost, up to $500

      Requirements: Must be Energy Star-qualified. 

Photovoltaic system tax credit: 30 percent of the cost of the system, up to $2,000

Requirements: Must provide electricity for the residence and meet applicable fire and electrical codes.  

Solar water heating system tax credit: 30 percent of the cost of the system, up to $2,000

Requirements: Must be certified by the Solar Rating Certification Corporation or a comparable group endorsed by the state government where the system is located.  

Water heaters tax credit: $300

Requirements: Gas or propane water hearers with an Energy Factor of at least 0.8; heat pump water heaters with an Energy Factor of at least 2.0 

Windows and skylights tax credit: 10 percent of the cost (not including labor), up to $200

      Requirements: Energy Star-qualified or meets the International Energy Conservation Code.  
 

Forms you'll need to claim your tax credits 

* To download Form 5695, which you'll need to file for a residential energy credit, go to http://www.irs.gov/pub/irs-pdf/f5695.pdf/ 

* For Form 8910, go get the alternative motor vehicle credit, go to http://www.irs.gov/pub/irs-pdf/f8910.pdf 

The fine print

Manufacturers need to certify that their products are eligible for the credit, and you'll need a copy of that certification, at least for your files. Depending on where you live, you may also be eligible for rebates or other incentives when you make energy-related improvements to your home. For state-by-state details, see http://www.dsireusa.org/ 

The cap on the tax credit for installing qualifying insulation systems, exterior windows and skylights, exterior doors, and metal roofs over the two-year period is $500. (No more than $200 can be applied to installation of new windows.) Gains are higher for people who install solar panels or solar water heating equipment--and these incentives are available for an extra year, through 2008. Credits for purchasing a hybrid car or light truck vary widely, depending on the fuel-efficiency of the vehicle and on whether the manufacturer has sold its 60,000th vehicle.  

For more information, see the sources listed below

      IRS info:

http://www.irs.gov/newsroom/article/0,,id=153397,00.html

      Energy Star info:

http://www.energystar.gov/index.cfm?c=products.pr_tax_credits

http://www.energystar.gov/index.cfm?c=windows_doors.pr_taxcredits

      Department of Energy info:

http://www.energy.gov/taxbreaks.htm

      Tax Incentive Assistance Project info:

http://www.energytaxincentives.org/

      Natural Resources Defense Council info:

http://www.nrdc.org/media/2007/070309a.asp

      State by state information:

http://www.dsireusa.org/

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