Energy Tax Breaks New in 2006

Volume 1 Issue 2006

Hybrid Car Credit. Hybrid-car buyers can claim a tax credit for vehicles purchased beginning January 1, 2006. Depending on the vehicle's fuel economy, the tax credit can be as high as $3,400. This credit will start to phase out for a manufacturer's line of hybrids once it sells its 60,000th hybrid. Toyota is expected to reach that mark within the first few months of 2006. Partial credits will be allowed for another 12 months once the cap is hit. Obviously the American car companies had a hand in this as they trail Toyota in the hybrid market.

Energy-saving home improvements credit.

A modest credit equal to 10% of the cost of skylights, outside doors, windows, pigmented roofs and high-efficiency furnaces, water heaters and central air conditioners installed in a primary home after 2005. The maximum credit is $500, and no more than $200 of that amount can be attributable to windows.

Businesses get a 30% credit on solar heating units and fuel cells. Builders can claim a special tax credit for energy-efficient homes that are sold in 2006. The maximum available credit is $2,000 per house.

Energy-saving improvements to commercial realty can be expensed rather than capitalized and depreciated over time beginning in 2006. However, the deduction is capped at $1.80 a square foot of floor space.