The Energy Policy Act of 2005 (EPACT), signed by President Bush on August 8, 2005, offers consumers and businesses federal tax credits for making energy conscious purchases in 2006 and 2007.

Tax Credit Eligibility

Insulation

If your home was built as few as 10 years ago, it is probably among the more than 46 million US homes that Harvard University says are under-insulated by today's minimum standards. Inadequate insulation is one of the main reasons why the average American home is losing between 10 and 50% of its energy each year. Note, only the cost of the insulation material counts towards the credit.

Amount of Insulation Needed

The IRS Guidance References the insulation levels of the 2001 and 2004 International Energy Conservation Code (IECC). These model-building codes are fairly complex sets of guidelines that are designed to tell builders how much insulation to put in a home based on a number of factors. For simplicity, the North American Insulation Manufacturers Association ("NAIMA") has taken these levels of insulation and combine them with recommended levels of insulation form the US Department of Energy. See the Following Map for state-by-state R-value recommendations. These levels should meet the criteria for the Federal tax credit:

Homeowners

Homeowners could qualify for tax credits in the next two years in the following areas:

• Home improvements, such as: o Window, skylight or exterior door replacement (10% of cost up to a cap of $200) o Added insulation to walls or ceilings (10% of cost up to a cap of $500) o Purchasing highly efficient heating, cooling, and water heating equipment ($50-$300)
• Purchase or lease of a high-efficiency passenger vehicle ($250-$3,000)
• Installation of solar water heating systems or photovoltaics (30% of cost up to a cap of $2,000)
• Installation of fuel cells (30% of cost up to $500/500 watts capacity)

Business Owners

Business owners can be eligible for incentives such as:

• New or renovated buildings that save 50% or more on annual energy costs for heating, cooling and lighting compared to national standards (deductions of up to $1.80/sq ft) o Prorated deductions for improvements on lighting, HVAC or envelope systems (up to $0.60/sq ft for any one system)
• Purchase or lease of a high-efficiency passenger or heavy-duty vehicle (based on weight class, fuel economy, and cost)
• Solar equipment, including solar-hybrid lighting systems (30% of cost)
• Use of distributed generation technologies: fuel cells and microturbine systems (30% of cost up to $500/500 watts capacity for fuel cells, microturbines qualify for a credit of 10% of cost up to $200/kilowatt capacity)

Home Builders and Appliance Manufacturers

• For qualifying models, home builders can be eligible for credits up to $2,000 per home sold, and manufactured home producers can qualify for up to $1,000 per home sold.
• Manufacturers of high-efficiency refrigerators, clothes washers and dishwashers can be eligible for credits of $75-$175 per unit shipped