Did you know that you can get a tax credit for replacing those old, leaky windows in your house? Or for installing central air conditioning? Cool, huh?

The Energy Policy Act of 2005 (EPACT), signed by President Bush on August 8, 2005, offers taxpayers specific tax credits for improvements in homes that increase energy efficiency if the improvements are made between January 1, 2006 and December 31, 2007.

This includes installation of energy efficient windows, doors, skylights, insulation and even central AC. There is also a tax credit for adding solar panels, solar water heating equipment, or a fuel cell power plant to their homes. Sorry, they don’t qualify if they are used to heat your swimming pool or hot tub.

Most of the credits are a percentage of the cost, but there are caps. For instance, for qualifying exterior windows the credit is 10% of the cost, not to exceed $200. Check out the specific credits and the exceptions to the credits at the Department of Energy and the IRS websites.

Department of Energy

IRS

The Federal government will give purchasers of a new, qualifying hybrid vehicle a tax credit if the vehicle was purchased or placed in service on or after January 1, 2006. A tax credit is subtracted directly from the total amount of federal tax owed, thus directly reducing or eliminating the tax you must pay.

Note that if you lease a vehicle, the leasing company gets the credit. The tax credit only applies to purchasers of qualifying vehicles.

To find out which vehicles qualify and the tax credit associated with them, go to the IRS website article “Hybrid Cars and Alternative Motor Vehicles”.

It’s a way to reduce your use of fossil fuels, save the environment and get a break from Uncle Sam all in one.