New Federal Law Offers
Tax Credits for Energy-Efficient Purchases
August 10, 2005 — By Sudeep Reddy, The Dallas Morning News
The energy bill won't lower the cost
of your fill-up anytime soon. And it probably won't cut the nation's
dependence on foreign oil.
But through tax breaks and other subsidies, the legislation that
President Bush signed into law Monday encourages conservation and the
development of emerging energy technologies.
Much of the debate about the bill has been focused on industry, which
will receive tax benefits for producing ethanol; generating power from
wind and the sun; and building new nuclear and coal plants.
The new law has benefits for consumers, too.
It offers tax credits for purchasing certain new appliances or vehicles
with clean-diesel or hybrid technology, as well as for making home
improvements that help energy efficiency.
The law also will extend daylight saving time by four weeks -- from the
second Sunday in March to the first Sunday in November.
The Alliance to Save Energy estimated that, by the year 2020, the
energy-efficiency measures across the bill could reduce growth in U.S.
energy consumption by almost 10 percent.
"That's fairly significant for what are relatively low-cost measures for
the government and aren't sacrifice requests of the public," said the
nonprofit group's president, Kateri Callahan.
Manufacturers and the Internal Revenue Service still must hash out the
size of tax breaks for specific models of cars and appliances. In most
cases, retailers will likely promote the savings.
TXU Electric Delivery, which runs an energy-efficiency program through
contractors, said it's analyzing the new legislation for how the federal
measures could supplement the state-backed efforts it employs today.
The energy bill's tax credits "could work in concert with our
weatherization programs to encourage more energy efficiency," said Carol
Peters, a spokeswoman for the regulated company that delivers power
across North Texas.
Some tax benefits could spur consumer demand for renewable technologies
such as solar energy.
Solar-powered hot water systems have been adopted across the state for
decades, enough that the cost has dropped to about $3,000 to $4,500 for
some units, said Russel Smith, executive director of the Texas Renewable
Energy Industries Association.
The energy bill offers credits of 30 percent of the cost, up to $2,000,
for installing a solar water heater or pricier solar panels for
generating electricity.
"It is definitely a positive," Mr. Smith said of the tax credit.
"Everything I've seen indicates that the industry is gearing up to try
to respond to that."
The goal of the consumer tax credits is to lower energy demand that has
helped raise energy prices over the years. Promoting the efficiency
measures can help most households cut their consumption and save money
in the long run, Ms. Callahan said.
"New homes are going to last 50 or more years," she said. "So if you
build the energy efficiency into that building, the energy savings go on
and on and there's a tremendous return on your investment."
Among the benefits available to individual consumers:
--Home Improvement: Consumers can receive a 10 percent tax credit -- up
to $500 -- for home improvements in 2006 and 2007. The measure covers
products such as advanced thermostats, insulation, doors and windows.
The credit for new windows is capped at $200.
--Efficient Appliances: Certain efficient air conditioners, heat pumps
and water heaters can provide a tax credit of up to $300. Purchasing a
furnace or boiler provides a credit of up to $150, and $50 for advanced
fans.
Manufacturers also receive tax benefits for producing high-efficiency
washers, refrigerators and dishwashers.
--Hybrid Vehicles: Tax credits for hybrid, fuel-cell or clean-diesel
vehicles can offer some of the largest benefits to individual consumers.
But they'll also be some of the hardest to decipher.
The credits, starting in January, replace a $2,000 tax deduction offered
for hybrid vehicles.
One credit ranges from $400 to $2,400 based on the fuel-economy rating
of the new vehicle. Another credit of $250 to $1,000 is based on how
much gasoline the vehicle is expected to save over its lifetime.
Once a manufacturer sells 60,000 hybrid vehicles that are eligible for
the tax break, the size of the credit starts diminishing.
--Solar Panels: In 2006 and 2007, consumers can receive a tax credit for
30 percent of the cost of installing solar panels or a solar-powered
water heater, up to $2,000.
In Texas, the heaters can run a few thousand dollars. The price of solar
panels depends on the size of the system, with a project often
stretching into the five figures. Solar systems for pools are
specifically excluded from the tax credit.
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Source: Knight Ridder/Tribune Business News |