Solar-energy tax breaks; cold-weather preparations

Q: Back in the early 1980s, we bought a solar water heater for our home in Colorado and took advantage of a great federal tax credit (I think it was around 40 percent). I heard on the news that the new energy bill recently signed by the president has tax credits for solar. Are these the same as what we had before?

A: Actually, they’re a lot better.

The Energy Policy Act of 2005 is the first major federal government program on energy in the past 13 years, and it gives tax credits far beyond the solar-only ones that started during the Carter administration and ended at the end of 1985.

The new bill provides tax credits for highly efficient new homes, for improvements to existing buildings, high-efficient air conditioners and home fuel cell systems as well as solar water heating systems and photovoltaics (solar electric systems) installed starting Jan. 1, 2006.

While the amount of the credits range from 10 to 30 percent or offers a fixed amount, depending on the measures you take, you’re eligible to take advantage of multiple tax incentives when you buy a home or improve your current one. And keep in mind that these are credits, not deductions — the amount of the credit is subtracted directly from the taxes you owe, unlike deductions which are subtracted from your income to determine your tax liability.

If you’re buying a new home that cuts energy use by at least 50 percent as compared to the model energy code, you will get a $2,000 tax credit. Note that there are many energy-saving strategies that can easily make your next home this efficient.

Fix up your current home with insulation or new windows or doors and you’ll get a credit of 10 percent (up to $500). Buying high-efficiency air conditioners, water heaters or fans can get you a credit up to $300. Solar water heating systems and solar electric systems are eligible for 30 percent credits (up to $2,000 each).

There are other products and building strategies eligible for the credits also, including incentives specifically for manufactured homes, so check out this easy-to-follow summary of the incentives at aceee.org/press/Tax—incentive05.pdf, or get a summary of the various programs at http://fsec.ucf.edu/EPAct-05.htm.

At a time when gas prices at the pump are at record highs and we’re getting ready to face higher heating bills this winter, making your home more energy-efficient is a better idea than ever — especially when the government is helping to pay for it.

Q: What should we be doing now before the cold weather gets here to make sure that our house is comfortable but still as energy-efficient as possible?

A: The U.S. Environmental Protection Agency offers some tips that can cut your energy bill by as much as 20 percent annually. Check out their free Guide to Energy-Efficient Heating and Cooling at www.energystar.gov/hvacguide.