By investing your tax refund into energy-friendly home improvements this year, you'll qualify for a bigger return next year.
The Energy Policy Act of 2005 provides federal income-tax credits to consumers who purchase and install energy-efficient items. The tax credits apply to improvements you make to your primary residence from Jan. 1, 2006, through Dec. 31, 2007. Credits vary on individual projects. The maximum amount a homeowner can claim for all improvements combined is $500 during the two-year life of the tax credit.
A deduction reduces the amount of income subject to tax, but a tax credit reduces the amount of income tax you have to pay.
The following energy-conscious improvements qualify for the tax credit:
Exterior windows and skylights
Storm windows
Exterior doors
Storm doors
Metal roofs
Insulation
Central air conditioning
Air-source heat pumps
Geothermal heat pumps
Gas, oil or propane furnace, or hot-water boiler
Advanced main air-circulating fan
Electric heat pump water heater
Solar energy systems and fuel cells also qualify for this program. Log on to www.energytaxincentives.org to learn more about the tax credits and how to apply for them.
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