IRS Offers Incentives for Energy Efficiency

By: Jennie L. Phipps: REALTOR® Magazine Online
When the Energy Tax Incentives Act of 2005 takes effect on Jan. 1, taxpayers will enjoy dollar-for-dollar federal tax reductions for the expense of improving the energy efficiency of their homes, including investing in solar energy, with no maximum income restrictions.

In 2006 and 2007, taxpayers can receive a credit of up to 30 percent of the cost of installing solar water-heating equipment, up to $2,000 per tax year; a credit of up to 30 percent for solar equipment that generates electricity, also up to $2,000; and a 30-percent credit for a fuel-cell power plant, up to $500 of the installation cost, although fuel cell technology is not yet practical for use in a residential environment. Solar water systems, on the other hand, are easy to install; and the energy savings quickly recoup the cost.

"I think even without the tax credit, solar hot-water systems are economical. You'd almost be crazy not to get a solar hot-water heater right now-especially with natural gas prices going up," said Noah Kaye of the Solar Energy Industries Association. A reliable, professionally installed solar hot-water system can run as little as $3,500; high-end systems, suited for colder climates where freezing could be a factor, cap out at $6,000, although they have virtually no ongoing costs and require only infrequent maintenance.