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 Dear
Tax Talk,
We just built a new home and bought new appliances. Will
we be able to claim any tax credit for buying energy-saving appliances?
-- Sandra
 Dear
Sandra,
The energy credit is alive and well at least through the
end of 2007. The credit is available for new construction as well as energy-saving
improvements to existing homes.
A tax credit can provide significant
savings. It reduces the amount of income tax you have to pay. Unlike a deduction,
which reduces the amount of income subject to tax, a tax credit directly reduces
the tax itself. The maximum amount of homeowner credit for
all improvements combined is $500 during 2006 and 2007. Solar energy and fuel-cell
improvements have separate limitations. Appliances in general
do not qualify for the credit. Certain water heaters and heating, ventilation
and air-conditioning systems do qualify. In addition, energy-efficient windows,
doors, roofing and insulation qualify. Within each category
of improvement you have to meet certain energy-efficiency targets. The credit
is a percentage of the cost of the improvement up to certain limits. Energy
Star provides a detailed list of what items qualify for the energy-savings
credit. Use IRS Form
5695 to claim the credit on your 2007 income tax return. | 
