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Tax credits for going green

Leprechaun pot of money You knew I couldn't let St. Patrick's Day slip by without reminding you of the many green tax breaks out there that could be almost as valuable as a leprechaun's pot of gold at the end of a rainbow.

Let's start at home.

If you made energy home improvements to your residence last year, be sure to claim your generous tax credit. It could save you $1,500 on your tax bill.

But 2010 was the last year for such a big energy and environmental tax break. The residential energy-efficient tax credit that took over on Jan. 1 is a much more limited version.

For home energy improvement measures installed between Jan. 1 and Dec. 31, the tax credit is generally 10 percent of costs up to a maximum of $500. 

But your exact credit could be less, depending on the type of improvement you make. The special per-project limits are:

  • 10 percent of costs, capped at $500, for insulation, roofs and doors
  • $150 for high efficiency furnaces and boilers
  • $300 for air conditioners and heat pumps
  • $50 (yes, just fifty) for main air circulating fans
  • $300 for energy efficient water heaters
  • 10 percent capped of costs, capped at $200, for Energy Star windows 

Also, the overall $500 tax credit cap applies to anyone who received any previous energy tax credit since Jan. 1, 2005.

So if you’ve already claimed a cumulative credit of $500 or more, you can't claim any addition home energy improvement costs on you 2011 tax return.

But if you’ve claimed less than $500 over the years on home energy improvements, yoou can claim the remained for any upgrades you make this year.

Energy Star's website offers details on the eligible improvements and credit limits for both 2010 and 2011 tax years.

And going greener offers even larger tax breaks.

You'll get more of a credit if you invest in alternative home energy systems that are more energy efficient.

The Residential Energy Efficient Property Credit equals 30 percent of what you spend on solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines and fuel cell property.

Even better, in most instances there's no cap on the credit amount. Whatever is 30 percent of your costs, including labor to install, is your allowable credit.

Credits for these more extensive and expensive home energy upgrades are available as long as the systems are in place by the end of 2016.

Now to your vehicle.

The hybrid tax credit also ended when 2010 wrapped up. Good. I'm all for tax breaks and fuel-efficient cars, but this credit was overly complicated.

With varying credit amounts expiring at different times, it was  a mess to keep track of. And let's face it. Once the Toyota Prius tax break expired very soon after the credit was offered, not many drivers in the hybrid market cared about it.

That's right Congress, your thinly veiled attempt at protectionism -- and in this case I mean protecting the political contributions you got from the American auto industry -- didn't work. Ford was the only domestic car maker to sell enough hybrids to see its credits reduced.

But with gas near $4 again, people who are auto shopping are looking for vehicles that provide better mileage. And those who want to shift to a higher fuel conservation gear are looking at electric vehicles. Those folks also could get a tax credit of $2,500 to $7,500, depending on battery capacity, for buying plug-in electric drive vehicles.

Since a credit reduces your tax bill dollar-for-dollar, it's a more appealing tax break. And it could help offset the higher price of an electric auto.

The electric car credit will phase out like the hybrid one (again with the complexity!), based on the number of vehicles sold.

But the good news for consumers is that manufacturers have sold very few of these next generation autos.

So you've got time to visit your local dealerships and claim the tax credit.

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