Energy Bill Helps Home Improvers and Hybrid Car Buyers
Center for Personal Finance editors
If you're planning on making your home more energy efficient or planning on buying a hybrid car, you might be able to save some money when tax time comes.
Energy-efficient home improvements
Under the new energy bill, you can claim a tax credit of up to 10% of the cost of energy-saving home improvements, up to a lifetime maximum of $500. The credit is limited to improvements made between Dec. 31, 2005, and Dec. 31, 2007. The amount you can claim for specific improvements is capped, but you can combine improvements to reach the max.
For example, homeowners can get $300 in credit for installing highly efficient central air conditioners, heat pumps, or water heaters. Installing energy-efficient windows is good for a $200 credit. Upgrading thermostats, caulking leaks, and stopping other energy waste can help reduce your bill as well.
You're also eligible to receive a credit of up to 30% of the cost, or up to $2,000, for installing solar-powered hot-water systems. Solar heaters installed for hot tubs or swimming pools, though, aren't eligible.
Hybrid vehicles
The energy bill also includes a new tax credit for consumers who purchase hybrid cars and extends an existing tax credit, for as much as $4,000 for buyers of electric cars or those powered by rechargeable batteries.
Starting in 2006, hybrid-car buyers will be eligible for tax credits ranging from $1,700 to $3,000. The credit will be tied to two components: hybrids that save the most fuel compared with 2002 models, and the vehicle's estimated lifetime fuel savings. The credit takes effect Jan. 1, 2006, and replaces the existing tax deduction for hybrid vehicles. The deduction was scheduled to fall to $500 next year.
Early birds will catch the worms. The law limits the tax credit to 60,000 vehicles from each auto maker, so credits on popular models could disappear well before the tax break expires at the end of 2009.
Whether you plan on making your home more energy efficient or plan on purchasing a more energy-efficient vehicle, we can help. Call us today for all your borrowing needs.
For more information about the energy bill, visit energy.gov.
Published November 9, 2005
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