Tax savings for energy saving improvements

Homeowners - Save Energy & Cash

The Energy Policy Act of 2005 lets homeowners claim up to $500 on their federal income taxes for qualified energy-saving improvements placed in service through December 31, 2008. Here are some tips to help clients cut costs while cashing in on tax credits:

Central air conditioning units that qualify for the credit must meet the highest tier standards set by the Consortium for Energy Efficiency (CEE; http://www.cee1.org/). Note that this is higher than the Energy Star (energystar.gov) standard.

Upgrades such as insulation, replacement windows and sealing ducts -- which retain cool air -- can earn the credit if using qualifying products. (Visit naima.org, www1.eere.energy.gov, efficientwindows.org and energystar.gov for more information.)

Fans for cooling (and heating) systems that consume no more than 2% of the system's energy use qualify. The Gas Appliance Manufacturers Association marks such units with an italicized "e" in its Consumers' Directory of Certified Efficiency Ratings (http://www.gamapower.org/).

Appliance manufacturers must certify that their equipment meets the necessary specifications. Clients should obtain a copy of this certification upon purchase and keep it on file in case the Internal Revenue Service has questions.

Also, the $500 credit applies to each improvement made over the two-year period, so if clients take a $350 credit the first year, they can still take a $150 credit in the second year. (The cap remains $500, however.)

To learn more, visit the Tax Incentives Assistance Project at http://www.energytaxincentives.org/.