Energy Tax Savings

The Energy Policy Act of 2005 was signed into law on August 8, 2005. It takes effect six months from that date. The Act provides numerous energy efficiency tax credits. A tax credit is more helpful than a tax deduction. A tax deduction reduces the amount upon which you pay tax. A tax credit reduces the amount of the tax itself. Here are some of the opportunities provided:

• Up to 30% of the cost or up to $2,000 for installing solar-powered hot-water systems used exclusively for purposes other than heating swimming pools and hot tubs;
• Up to $500 on the amount spent to upgrade thermostats, to caulk leaks, or stop energy waste;
• Up to $200 credit for installation of new exterior windows;
• Up to $300 for purchase of a highly efficient central air conditioner, heat pump or water heater;
• Up to $150 for installation of a highly efficient furnace or boiler; and
• Tax credits for contractors who build energy-efficient homes and manufactures that make energy-efficient appliances, which could lower prices consumers pay for these products.

The tax credits for homes can be taken on 2006 and 2007 returns, but the total credits for the two years cannot exceed the $500 maximum.

Several Sections of the Energy Policy Act provide very specific engineering and other requirements to qualify for tax credits, specifically Subtitle C: Energy Efficiency Products (Section 131). This section of the legislations should be consulted for further details.

The tax credit incentives are in addition to the incentives supporting energy efficiency already offered in New York State by The New York State Energy Research & Development Authority.

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