New Tax Credits
The recently enacted $14.5 billion energy bill was enacted before Hurricanes
Katrina and Rita, and the tax credits for spending on energy-saving home
improvements and vehicles don't kick in until January 1, 2006. Since it
appears that we are in for a period of higher utility and gas prices, the
NEW credits can help.
Energy-efficient appliances such as dishwashers or refrigerators, won't
qualify. Congress elected to pass the tax savings on to the manufacturers
and not the consumers.
Individuals are eligible for tax credits:
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30% of the cost of solar panels, plus 30% for a solar water heater.
Each credit is capped at $2,000. The equipment must be installed in 2006
or 2007. The credits are available on primary and vacation homes.
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10% of the cost of energy-saving doors, windows, insulation, and roofs.
Up to $300 for efficient central air conditioners and water heaters
powered by natural gas, propane or oil. $150 for efficient furnaces and
$50 for energy-saving fans. These expenses are capped at $500.
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Up to $3,400 for a hybrid car or light truck. The purchase must be made
between January 1, 2006 and December 31, 2010. Manufacturers are limited
to selling 60,000 qualifying vehicles.
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Taxpayers subject to the AMT will not benefit by the
NEW credits unless Congress takes additional steps.
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Note that these are CREDITS, not DEDUCTIONS. The difference is that
deductions reduce your taxable income. Thus your savings is the amount
of the deduction times your marginal tax rate. Credits, on the other hand,
directly reduce you tax liability by the calculated amount. This is without
regard to your marginal tax rate.
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