Tax credits reward energy savers

Donna LeValley, contributing editor of J.K. Lasser’s income tax guide, suggests taxpayers check the Energy Star Web site for information about energy-saving home improvements. Energy Star is a joint program of the U.S. Energy Department and Environmental Protection Agency. The Energy Star label indicates a device meets government energy efficiency guidelines.

Be warned, this credit isn’t intended to apply to household appliances like dishwashers or refrigerators, even if they bear the Energy Star label. It’s only for home improvements that reduce a home’s “heat loss or gain,” according to the law.

You don’t have to submit any of the supporting documentation with your tax return, but you must submit Form 5695 showing your credit calculation.

There’s another energy credit in the tax code for hybrid or alternative-fuel vehicles, though applying it is a bit trickier.

Taxpayers who bought a new hybrid gas-electric car or truck in 2006 are eligible for a credit that depends on the vehicle’s fuel economy, weight and technology.

Complicating the picture is the fact that the credit is reduced on a quarterly schedule after the quarter in which the manufacturer reaches sales of 60,000 of all its hybrids and alternative fuel vehicles.

For example, the popular Toyota Prius originally qualified for a top credit of $3,150. Last Oct. 1, after Toyota reached the 60,000 hybrid vehicle mark, the Prius credit fell to $1,575.

Taxpayers don’t have to worry about calculating the credit themselves or figuring out whether the manufacturer has reached the 60,000 mark.

Instead, go the IRS Web page for a list

of each qualifying vehicle and its available credit. Models marked with a small cross (+) have already had their credits reduced because the manufacturer has sold 60,000 qualifying vehicles. The IRS says it updates the Web site constantly, so the figures on the Web page should be accurate.

File Form 8910, “Alternative Motor Vehicle Credit,” when claiming this credit.

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