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  Energy Tax Incentive Act
     Of 2005

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During August, the Energy Tax Incentives Act of 2005 was signed into law.  While most of the provisions will affect energy producers and providers, there are many tax credits and provisions that will have an impact for both our small business clients as well as individual homeowners.

We'll address only the latter provisions in this article.  If you have questions about the Act or some of its implications for energy providers, please do not hesitate to contact our office for assistance.

Energy Efficient Personal Residence Credit

Energy Efficient New Home Construction Credit

Energy Efficient Improvements Deduction

Energy Efficient Business Property Credit

Energy Efficient Residential Property Credit

Alternative Fuel Vehicles

Energy Efficient Appliances

 

Energy Efficient Personal Residence Credit

Energy efficient improvements and property purchases for your principal residence are now eligible for a $500 personal tax credit equal to 10% of qualifying energy efficiency improvements plus the cost of residential energy property expenditures.

These qualifying improvements include items such as insulation, exterior windows, skylights and doors. Residential energy property includes natural gas, propane, or oil furnaces; hot water boilers; advanced main air circulating fans; heat pumps and central air conditioners.

Energy Efficient New Home Construction Credit

Contractors are eligible for a credit of $2,000 per home for new construction or manufactured homes meeting a 50% energy efficiency standard. The credit is available for energy-efficient homes located in the U.S. and sold in 2006 or 2007. A credit of $1,000 is available for certain manufactured homes which only meet a 30% energy efficiency standard.

Energy Efficient Improvements Deduction

The costs of major energy-saving improvements to commercial buildings are now eligible for a maximum deduction of $1.80 per square foot of affected space. The qualifying property must be installed as part of interior lighting systems; heating, cooling, ventilation or hot water systems; or the building envelope, and must meet a 50% energy-reduction standard.

Energy Efficient Business Property Credit

Various credits ranging from 10% to 30% are now available for businesses which purchase or install qualifying solar energy property, fuel cells and micro-turbine power plants.

Energy Efficient Residential Property Credit

Congress has enacted up to a 30% tax credit for homeowners installing solar hot water, electricity-generating solar equipment or fuel cell property. The maximum credit is $2,000 for the solar equipment and $500 for each .5 kilowatt of fuel cell capacity. This credit is only available for equipment used to heat your home.  It is not available on solar equipment used to heat swimming pools and hot tubs.

Alternative Fuel Vehicles

The previous $2,000 tax deduction for the purchase of hybrid vehicles has been replaced with a tax credit that could be as high as $3,400. Alternative fuel credits are also available on vehicles using qualifying advanced lean-burn technology and on fuel cell powered and alternative fuel vehicles. These credits are for purchases after 2005 and the credits vary as to cut-off date ranging from 2009 to 2014.

Energy Efficient Appliances

Manufacturers of appliances such as dishwashers, washing machines and refrigerators will get a credit for producing energy efficient models.  There is no tax break currently in place for consumer purchases of energy efficient appliances.

 

 

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