New Law Can Save Consumers Energy, Money, CCH Says
(RIVERWOODS, ILL., July 29, 2005) – Consumers should be able to save energy and money, too, if they’re in a position to take advantage of provisions of the nation’s new energy law, according to CCH INCORPORATED (CCH) a leading provider of tax and accounting information, software and services (tax.cchgroup.com). Both houses of Congress have passed the Energy Policy Act of 2005 and sent it to the White House, where President Bush is expected to sign it. For a CCH Tax Briefing on all aspects of the legislation, click here.
The Act provides more than $14.5 billion in tax breaks – the overwhelming preponderance going to businesses – over a ten-year period to boost conservation efforts, increase domestic energy production and expand the use of alternative energy sources such as solar, wind, ethanol, bio-mass and clean-coal technology.
But some consumers will also benefit, notes Mark Luscombe, CCH principal federal tax analyst.
“The bulk of the tax benefits will go to energy-related businesses and commercial users of energy, but homeowners, home purchasers, car buyers and consumers in general stand to benefit as well, either through tax credits or through the greater availability and affordability of energy-efficient homes and appliances,” Luscombe said.
Breaks for Car Buyers
Car buyers can benefit through tax credits for the purchase of a variety of energy-efficient vehicles, not all of which are currently available to the general public. The credit replaces a less generous tax deduction. In addition to familiar hybrid passenger cars and SUVs, the credit also applies to cars and trucks powered by fuel cells, advanced “lean burn” diesel and other alternative power sources.
The size of the credit varies depending on the weight class of the vehicle, its fuel economy and lifetime fuel savings. For example, a hybrid SUV weighing less than 8,500 pounds that is 200 percent as fuel-efficient as a 2002 model would qualify for a credit of $1,600. It could also qualify for an additional “conservation credit” based on projected lifetime fuel savings – up to $1,000 for a lifetime fuel savings of 3,000 gallons or more.
“Fortunately, car owners probably won’t have to do a lot of math ahead of time to figure the credit. Manufacturers will most likely be happy to do the calculations for them,” Luscombe observed.
The credits will be available beginning next year and run through 2010 for lean burn vehicles, advanced fuel vehicles and hybrid cars and light trucks. The credit for hybrid medium and heavy trucks ends after 2009. The credit for fuel cell vehicles extends to the end of 2014.
“Buyers should note that purchases made this year will not qualify for these new credits, so buyers should time their purchase accordingly,” Luscombe noted.
Credits for Homeowners
Homeowners and home-buyers can benefit in a number of ways from the new law during the next two years.
Homeowners can get a tax credit for 30 percent of the cost of buying and installing residential solar water heating and photovoltaic equipment. The maximum credit is $2,000 and solar water heaters for swimming pools and hot tubs do not qualify.
The 30-percent credit also applies to homeowners who install fuel cells to supply electricity. The maximum credit is $500 for each .5 kilowatt of capacity. The 30-percent credit expires at the end of 2007.
Homeowners who make energy-efficient improvements to existing homes can qualify for a 10-percent tax credit. Qualifying improvements include such things as insulation, metal roofs coated with heat-reducing pigments and energy-efficient windows, doors and skylights. The maximum credit is $500, but only $200 can come from expenses for windows.
Other items that meet certain criteria qualify for the credit with specific limitations. Advanced main air circulating fans qualify for up to a $50 credit; qualifying natural gas, propane or oil furnace or hot water boilers are eligible for up to a $150 credit; and some electric and geothermal heat pumps qualify for up to a $300 credit. The credits can be taken on 2006 and 2007 returns, but the total credits for the two years cannot exceed the $500 maximum.
“Once again, people wanting to take advantage of the new credits should delay their purchases until 2006,” Luscombe warned.
Indirect Benefits for Home, Appliance Buyers
Home buyers may benefit indirectly from a business tax credit for the construction of new energy efficient homes. Contractors and other suppliers installing energy-efficient heating and cooling appliances and other items in new homes are eligible for a new credit up to either $1,000 or $2,000 per dwelling unit, depending on the degree of energy efficiency. The $1,000 credit is for improvements of 30 percent over the energy consumption by a comparable dwelling unit; $2,000 for a 50-percent improvement. Manufactured homes qualify for the credit but with some additional limitations.
“The credit goes to the home builder, rather than the homeowner, but builders may pass the credit through to purchasers, who would end up with a more energy-efficient house than they otherwise could afford,” Luscombe observed. Like the credits for homeowners, this credit expires after 2007.
A similar indirect benefit may be provided by a manufacturers’ tax credit for energy-efficient dishwashers, clothes washers and refrigerators manufactured in 2006 and 2007.
“The goal is to encourage manufacturers to offer more efficient and cheaper appliances that will also save consumers money on their energy bills over the long haul,” Luscombe said.
About CCH INCORPORATED
CCH INCORPORATED (tax.cchgroup.com), based in Riverwoods, Ill., is a leading provider of tax and accounting information, software and services. It has served tax, accounting and business professionals and their clients since 1913. Among its market leading products are The ProSystem fx® Office , CCH® Tax Research NetWork™, Accounting Research Manager™ and the U.S. Master Tax Guide®. CCH is a Wolters Kluwer company.
Wolters Kluwer is a leading multinational publisher and information services company. Wolters Kluwer has annual revenues (2004) of €3.3 billion, employs approximately 18,400 people worldwide and maintains operations across Europe, North America and Asia Pacific. Wolters Kluwer is headquartered in Amsterdam, the Netherlands (www.wolterskluwer.com). Its depositary receipts of shares are quoted on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.
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