New tax rules this filing season are mostly a penny-ante assortment, but bigger tax savings are availableif you are thinking green. This is the first year you can take advantage of incentives built into the landmark 2005 Energy Policy Act, which will reduce your tax bill if you simply buy a fuel-saving car or install energy-efficient appliances. Without knowing it, people who have done very normal things in the last year may qualify for an energy credit, says Mark Steber, vice president at Jackson Hewitt Tax Service.
Do you drive a hybrid car? The Toyota Prius and Ford Escape, if bought new last year, may earn a tax credit of up to $2,600; the Honda Civic GZX gets you a $4,000 break. Though rare, natural-gas or methanol vehicles may be worth $12,000 in tax credits. (For a list of cars that qualify, go to hybridcars.com.) There is one catch: the full tax benefit for Toyota cars is reserved for the first 60,000 purchasers.
Did you renovate your home? You could claim up to $500 in credits for energy-saving insulation, skylights, exterior doors and windows, and up to $300 for a new heat pump, furnace or central air conditioner. And if you invested in solar water heating, the payoff at tax time is equal to 30% of the cost, up to $2,000.
It's a tax break that keeps on giving. Says Mark Luscombe, an analyst at CCH: "The real benefit of installing energy-efficient products comes from lower energy costs over time."