Do the basics
first
Most homeowners, before leaping into the brave new world of alternative energy, probably made other, easier home imrpovmeents first. These are the upgrades that could provide on your 2007 return a 10 percent tax credit with a lifetime cap of $500 for improving the energy efficiency of conventional technology in your home. A homeowner would have to do $5,000 worth of work to get the full amount. This is in addition to the solar credits.
Insulation materials. This includes exterior doors and certain metal roofs with special
coatings designed to reduce heat loss and gain. If your home is
more than 20 years old, its insulation probably no longer meets
minimum code. Spending money to improve it can pay off in heating
and air conditioning costs.
Replacement
windows. No more than $200 can be credited against the cost of replacement
windows, including skylights. This isn't much, but something's better than nothing
when you undertake this effective but expensive upgrade.
Energy-efficient
heating and cooling systems.
Up to $300 for high-efficiency
electric heat pumps and central
air conditioners -- those
meeting the 2006 Consortium
for Energy Efficiency specifications,
expected to be 15 SEER and
13 SEER. (SEER is an acronym
for seasonal energy efficiency
rating and is a gauge of efficiency
and performance for residential
air conditioners and heat
pumps.)
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Eligible purchases include: |
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High
efficiency conventional furnaces.
Up to $150 can be claimed
by homeowners who install
a highly efficient furnace
or boiler with annual fuel
efficiency of 95 or better,
or a gas, oil or propane hot
water heater with an energy
factor of 0.80. A storage
water heater's energy factor
is a measure of its overall
efficiency based on the use
of 64 gallons of hot water
per day. To achieve an energy
factor of 0.80, you must buy
a condensing water heater.
A credit of
$50 is available for installing a whole house circulating fan. This is a much
more powerful version of a ceiling fan, which draws hot air out through the attic
or the roof.
The costs of installation as well as equipment
are included in calculating the price of these energy improvements. The solar
systems can be installed in either a principal residence or a second home as long
as it is located in the United States. The systems can't be used to heat a swimming
pool or hot tub.
In most cases, you can claim the credit in two years
if you have two properties -- use it one year for a main residence
and the second year on a vacation home -- even a recreational vehicle
or boat could count if you can live aboard. But you can't take the
credits twice on the same property. You can, however, spread the
credit over more than one year by doing some of the work one year
and some of the work the next. If you owe too little in taxes to
take the entire credit in one year -- even though you've done the
work -- then you can carry forward the portion of the credit you
were unable to claim and deduct it in the following year.
Of course, it's always a good idea to check with your accountant if you have any questions about how to claim the credits. And be sure to keep an eye on Congress in case lawmakers eventually decide to also extend the 10-percent portion of the energy home improvements tax law.
