Home Energy-Efficiency $300.00 Improvement Federal IncomeTax Credit
The new $300.00 Energy Tax Credit Bill applies to energy efficient gas water heaters with an energy rating of
0.80. Keep your receipt proving the purchase of the qualifying water heater. For your tax records, retain a copy of
the Manufacturer Certification for Tax Incentive The Energy Tax Credit starts January 1, 2006 and will continue
through December 31, 2007.
For more information on the bill, please visit these sites:
http://www.energy.gov/taxbreaks.htm
http://www.house.gov/jct/pubs05.html
http://www.ase.org/content/article/detail/2654#home_improvement
What is a tax credit? You do not 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.
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A federal tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions such as those for home mortgages
and charitable giving, for example lower your taxable income. If you are in the highest 30 percent tax bracket,
your income tax is reduced by 30 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.
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