One of the more positive aspects of the economic stimulus bill is the expanded tax credits for people who make their homes more energy efficient. You can now apply 30% of a qualified item’s cost to your tax bill if it provides more energy efficiency. The maximum tax credit increased from $500 to $1,500.00.

Do your homework. Many energy saving devices don’t qualify for a tax credit. Make sure the product or home improvement qualifies before you make your final decision.

Most manufacturers will certify that their product qualifies for a tax credit. Get a copy of that certification BEFORE you buy it. Then, check it out.

Here are some web sites with information on which products qualify.

The Alliance to Save Energy
www.ase.org

The US Department of Energy
www.energy.gov

Energy Star
http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#c1

Track down the specifications before you buy the product. Once your homework is done, then, make the purchase and cut your energy bills.

Here’s an example.

If you bought new energy efficient windows…which qualify for the tax credit if the U Factor is .30 or below and has a solar heat gain coefficient of .30. If the cost is $5,000, you can apply 30% of that…or $1,500 to your tax bill. That effectively reduces the cost of that improvement to $3,500. Plus, you’ll use less electricity each month.

Tax credits also apply to central AC units, roofing, insulation, electric heat pumps, doors, skylights and water heaters.

Solar power systems have no limit. 30 percent tax credit no matter how much they cost.

A tax credit is better than a tax deduction. A tax credit reduces the amount of tax you pay dollar for dollar. Tax deductions just lower your taxable income.