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If you're thinking of doing some upgrades to a more energy-efficient appliance, car, etc, now's a good time. Here's the skinny:
About Tax Credits
A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the tax that is owed. Beginning in tax year 2006, consumers will be able to itemize purchases on their federal income tax form, which will lower the total amount of tax they owe the government.
Automobile Tax Credits
Individuals and businesses who buy or lease a new hybrid gas-electric car or truck are eligible for, and can receive, an income tax credit of $250-$3,400 – depending on the fuel economy and the weight of the vehicle.
Home Energy Efficiency Improvement Tax Credits
Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in the home can receive a tax credit of up to $500 beginning in January 2006.
Business Tax Credits
Businesses are eligible for tax credits for buying hybrid vehicles, for building energy- efficient buildings, and for improving the energy efficiency of commercial buildings (as outlined in the Energy Policy Act of 2005).
Biodiesel/Alternative Fuels
Small producer biodiesel and ethanol credit. This credit will benefitsmall agri-biodiesel producers by giving them a 10 cent per gallon tax credit for up to 15 million gallons of agri-biodiesel produced. In addition, the limit on production capacity for small ethanol producers increased from 30 million to 60 million gallons. This is effective until the end of 2008.
Buildings
Credit for business installation of qualified fuel cells, stationary microturbine power plants, and solar equipment. This provides a 30% tax credit for the purchase price for installing qualified fuel cell power plants for businesses, a 10% credit for qualifying stationary microturbine power plants and a 30% credit for qualifying solar energy equipment. This is effective January 1, 2006 through December 31, 2007.
Business credit of energy-efficient new homes. This provides tax credits to eligible contractors for the construction of a qualified new energy-efficient home. Credit applies to manufactured homes meeting Energy Star criteria and other homes, saving 50% of the energy compared to the EPACT standard. This is effective January 1, 2006 through December 31, 2007.
Energy-efficient Commercial building deduction. This provision allows a tax deduction for energy-efficient commercial buildings that reduce annual energy and power consumption by 50% compared to the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) 2001 standard. The deduction would equal the cost of energy-efficient property installed during construction, with a maximum deduction of $1.80 per square foot of the building. Additionally, a partial deduction of 60 cents per square foot would be provided for building subsystems.
Energy-efficient appliances - This provides a tax credit for the manufacturer of energy-efficient dishwashers, clothes washers, and refrigerators. Credits vary depending on the efficiency of the unit. This is effective for appliances manufactured in 2006 and 2007.
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