Monday, July 17, 2006

2006 Energy Efficient Home Credit

Residential New Construction Tax Credit
A $2000 tax credit for new homes that are at least 50% more efficient than required by current building codes will encourage builders (who do not pay the energy bills for the homes they build) to construct energy-efficient houses, and increase the market for efficient technologies and practices

---------------TAX Credit FAQ--------------------
How many tax credits are there? There are two tax credits and a tax deduction. There is a tax credit for builders on new construction, a tax credit for homeowners who make energy efficient upgrades to their existing homes, and a tax deduction for commercial property owners who reduce energy consumption of their buildings.

How does a builder get the new construction tax credit? A builder must design the house to be 50% more efficient than a model IECC home. You can use numerous approved computer software to accomplish this. You must then build the home to those specifications and have an energy rater come out at do a performance test on the house.

What is a tax credit? You don’t receive an income tax credit when you buy the product, like an instant rebate. You claim the credit on your federal income tax form at the end of the year. The credit then increases the tax refund you receive or decreases the amount you have to pay.

Tax credits vs. tax deductions: In general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions – such as those for home mortgages and charitable giving – lower your taxable income. If you are in the highest 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the value of a tax deduction. But a tax credit reduces your federal income tax by 100 percent of the amount of the credit.

+ Notice 2006-27 provides guidances for the credit for building energy efficient homes other than manufactured homes.
+ IRS form 8908 to submit with your tax returns
+ Energy Star

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