Energy tax benefits for individuals.

• Author: Laffie, Lesli S.
• Position: FROM THE IRS

The Service has issued a fact sheet (FS-2006-14) highlighting the changes for individuals in the Energy Policy Tax Act of 2005 (P.L. 109-58) that are available for property placed in service after 2005 and before 2008. New Sec. 25C provides personal tax credits for making a principal residence (which must be in the U.S.) more energy efficient, and for buying certain energy efficient items. At the same time, the new law provides credits for various types of alternative motor vehicles (including hybrids).

Nonbusiness energy property: The new law provides a 10% credit for buying qualified energy efficient improvements. To qualify, a component must meet or exceed the criteria established by the 2000 International Energy Conservation Code (including supplements) and must be installed in the taxpayer's main home in the U.S. The following items are eligible:

* Insulation systems that reduce heat loss or gain;

* Exterior windows (including skylights);

* Exterior doors; and

* Metal roofs (meeting applicable Energy Star requirements).

Residential energy property expenses: In addition, there is a credit for costs relating to residential energy property expenses. To qualify as residential energy property, the property must meet certain requirements prescribed by the Secretary of the Treasury and must be installed in the taxpayer's main home in the U.S. Eligible items include:

* $50 for each advanced main air-circulating fan;

* $150 for each qualified natural gas, propane or oil furnace or hot water heater; and

* $300 for each new item of qualified energy efficient property.

The maximum credit for all tax years is $500; no more than $200 of the credit can be attributable to expenses for windows.

Solar equipment: The new law creates a credit available to those who add qualified solar panels, solar water heating equipment or a fuel cell power plant to their homes in the U.S. In general, a qualified fuel cell power plant converts a fuel into...