Tax Credits for Energy Efficiency

Many types of home improvements, such as adding insulation, replacement windows, and certain high efficiency heating and cooling equipment. The maximum amount of homeowner credit for all improvements combined is $500 during the two year period of the tax credit. Applies to improvements made from January 1, 2006 through December 31, 2007.
Purchasing hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles. The tax credit amount is based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models. Credits are available for vehicles placed in service starting January 1, 2006, and will be phased out over 15 months depending on the number of vehicles sold.
Qualified solar water heating and photovoltaic (solar electricity) systems. The credits are available for systems "placed in service" in 2006 and 2007. The tax credit is for 30 percent of the cost of the system, up to $2,000. This credit is not limited to the $500 home improvement cap.
Qualified fuel cell and microturbine systems. The credits are available for systems "placed in service" in 2006 and 2007 and are not limited to the $500 home improvement cap. There is a consumer tax credit of up to 30% of the cost (up to $500 per 0.5 kW of capacity maximum).

For more information on federal tax credits for energy efficiency, visit Energystar's guide website. Check with your tax advisor or the Internal Revenue Service (IRS) if you have questions.

Additionaly, related to biofuels, the Energy Policy Act:

Extends through 2008 the tax credit for biodiesel used as fuel; and excise tax credits and refunds for alcohol fuel and biodiesel mixtures.
Expands the tax credit for biodiesel used as fuel to include a credit amount for the per gallon production of biodiesel by certain small agri-biodiesel producers with a productive capacity of not more than 60 million gallons.
Treats renewable diesel fuel as biodiesel for purposes of the tax credit for biodiesel used as fuel.
Defines "renewable diesel" as diesel fuel derived from biomass using a certain thermal depolymerization process.
Revises the definition of eligible small ethanol producer for purposes of the tax credit for alcohol used as fuel to increase the limit on a producer's alcohol production capacity from 30,000 to 60,000 gallons.
Declares that vegetable oil made from soybeans and used in electric transformers as thermal insulation shall not be regulated as an oil identified under the Edible Oil Regulatory Reform Act.