KIPLINGER TAX CENTER
TRUSTED ADVICE TO HELP YOU LOWER YOUR 2007 TAX BILL
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Record-high crude oil prices and concerns about heating fuel costs this winter may have you thinking about outfitting your home with new energy-efficient windows and doors. Install them by December 31 and you can claim an energy tax credit for 10% of the cost up to a maximum tax credit of $500. No more than $200 of the credit can be allocated to new windows.
Installing a high-efficiency air conditioning system or water heater qualifies for a $300 tax credit, also subject to the $500 lifetime cap that applies to 2006 and 2007. So if you took a $300 credit last year, for example, the maximum credit you can take this year is $200.
Taxpayers who install solar panels, solar water-heating equipment or a fuel-cell power system in their homes by the end of the year are eligible for a 30% tax credit up to $2,000. But to qualify for the credit, no part of the system can be used to heat a poor or hot tub.
The home-based energy credits, which expire after this year, are more valuable than a deduction because they reduce your tax bill (or boost your refund) dollar-for-dollar, rather than merely reducing the amount of income that is taxed. And you can claim the credit regardless of your income level.
Also, if you bought a hybrid car or truck this year, you qualify for a tax credit of up to $3,000, depending on the make and model. However, the tax credit for some of the most popular fuel-efficient vehicles -- the Toyota Prius, Toyota Highlander Hybrid, Lexus RX 400h and Camry Hybrid—was eliminated for vehicles sold after October 1, 2007. The tax credit for other hybrid vehicles will continue through 2010. Check www.energytaxincentives.org for details on both the home and car energy tax credits.
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