New energy efficiency tax credits went into effect on January 1st, making it easier for U.S. families and businesses to reduce energy costs at home, at work, and on the road. As part of the Energy Policy Act of 2005, the new tax credits will allow consumers to reduce their 2006 tax bills on a dollar-for-dollar basis up to the amount allowed under the law. For example, consumers who purchase the most fuel-efficient vehicles could reduce their tax liability by up to $3,400, while those who install energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in the home can receive up to $500 off of their federal tax bill.

Specific tax benefits for the home include $50 for purchasing an advanced main air circulating fan; $150 for installing a highly efficient furnace or boiler; $200 for installing energy efficient windows; $300 for purchasing a highly efficient central air conditioner, heat pump, or water heater; and 30 percent of the purchase cost, up to $2000, for solar power and solar water heating equipment (this does not apply to equipment used to heat swimming pools or hot tubs).

Businesses may be eligible for credits such as a 30 percent tax credit for the installation of qualifying solar equipment on buildings. Companies that build highly energy efficient homes or manufacture energy-efficient appliances can also earn tax credits. See the Federal Tax Credits for Energy Efficiency page.

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