Energy Tax Incentives Act of 2005 - A Summary

See how the new energy bill affects you and your taxes.

In early August Congress passed, and the President signed the Energy Tax Incentives Act of 2005. The bill includes $14.5 billion in tax incentvies aimed at improving energy production and efficiency. Generally, provisions are effective after December 31, 2005. Credits listed below are not allowed for the Alternative Minimum Tax (AMT).

Tax Breaks for Individuals

• Residential energy efficient property - A nonrefundable tax credit for the purchase of solar water heating, photovoltaic equipment and fuel cell property for residential use. Maximum credit is $2,000 ($500 per half klowatt of capacity for fuel cell property).
• Alternative technology vehicles - A nonrefundable credit for the purchase of fuel efficient vehicles, including hybrid vehicles. Generally the credit consists of two parts:
  • A base amount based on weight clas, and
  • An additional amount for automobiles and light trucks based on fuel economy.

  The credit amount varies based on these two factors as well as the type of vehicle. For hybrid vehicles, the total credit ranges from $650 to $3,400.

  Note: Replaces the clean-fuel "hybrid" vehicle deduction.

• Non-business energy property - A $500 maximum lifetime nonrefundable credit for the purchase of energy-efficient improvements such as furnaces, hot water heaters, and heat pumps meeting certain specifications to existing homes.

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