Tax breaks for saving the planet
To promote cleaner energy production and conservation, Congress has enacted a series of “green” tax credits for purchases of qualified vehicles and home improvements. These credits have some caveats. Many of the credits related to specific cars and trucks will be phased out as automakers reach pre-determined sales goals. The home products must be placed in service by January 1, 2008. If you qualify, says Mark Luscombe, a principal tax analyst at CCH, a publisher of tax information, calculate your credit with a tax preparer. Green tax breaks:
HYBRID VEHICLES
For alternative fuel.
Take a tax credit up to $2,400 when purchasing an alternative fuel vehicle with a fuel efficiency of 250 percent of a 2002 gas-only powered vehicle.
For fuel conservation.
Buyers of hybrids also are eligible for a conservation credit that’s calculated using the lifetime fuel savings of the vehicle. This credit ranges from $250 for savings of at least 1,200 gallons of gas to $1,000 for 3,000 gallons.
OTHER VEHICLES
For non-gas vehicles.
Credits are available if you buy a car or lightweight truck that operates on fuels other than gas or diesel, (electric vehicles are no longer eligible). For alternative fuel vehicles, credits range up to $4,000 for a car weighing up to 8,500 pounds. For a fuel-cell vehicle, two credits are available—up to $8,000 for vehicles up to 8,500 pounds and a fuel-economy credit of up to $4,000.
HOMEOWNERS
For insulation.
Take a 10 percent credit when you install insulation materials or systems that reduce heat loss or gain, exterior energy-efficient windows and doors, and certain roofing materials.
For heating/cooling.
Install energy-efficient electric or geothermal heat pumps and/or an energy-efficient central air conditioner and take up to $300 for the cost. You also can take up to $150 for natural gas, propane, and oil or hot water heaters. This credit and the insulation credit above are capped at $500 combined, and no more than $200 of the credit can be attributable to window expenses.
For solar power.
If you buy and install residential solar water heating and photovoltaic electrical equipment, you can take a tax credit on each for 30 percent of the cost up to $2,000. A 30 percent credit is also available up to $500 for each 0.5 kilowatt of capacity when you install fuel cells to supply electricity.