Credit for saving energy at home

Thank you to Shirley Rooker of WTOP Radio's Call For Action program for mentioning an item posted earlier on Razziblog about federal tax credits available to home owners who install energy-efficient home improvements. Here's a replay of that posting:

Federal tax credits of up to $500 are available for certain energy savers purchased during 2006 and 2007. Tax credits are even more desirable than tax deductions because they directly reduce the amount of tax you owe. For example, a $100 tax credit cuts your taxes by a full $100, but a $100 deduction shrinks your taxable income and will pare your actual tax bill by only $28 or even less.

You can get a tax credit for up to 10 percent of the cost of buying (but not installing) new insulation, storm windows and doors, and on new windows that carry the Energy Star certification. (The tax credit on windows is capped at $200.) Credits ranging between $150 and $300 are available for qualified furnaces, boilers and central air-conditioners. And you can claim a credit of $300 for a new, qualified water heater.

For all improvements except new windows (for which the Energy Star seal is enough evidence), you will need to ask the sales person for a copy of the manufacturer's certification that the product complies with the program's efficiency standards. A smart salesperson will have it at the ready! Keep that certification on file with your records; you don't have to send it in with your 2006 tax return next spring. Links to IRS documents fully explaining the rules are posted on the www.energytaxincentives.org website maintained by the Tax Incentives Assistance Project, which is a nonprofit coalition of groups including the American Council for an Energy-Efficient Economy and the Alliance to Save Energy.