Energy Tax Incentives Just a Signature Away

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All that is keeps the Energy Tax Incentives Act of 2005 from becoming law is President Bush's signature. The Act, passed by the Senate July 29, has powerful provisions for the energy-related industries, but also includes provisions for renewable and alternative energy, energy efficiency and energy conservation.

“Accountants with clients in the energy community – including oil, gas, electricity, nuclear energy producers, as well as those involved in solar and other renewable power sources – will need to pour over the new provisions to determine how their clients can maximize entitlement to the tax breaks,” says Bob D. Scharin, a tax analyst with RIA. “Besides finding new tax savers, clients may find themselves benefiting from new eligibility rules for existing breaks.”

In addition to the provisions impacting the energy community, the Act contains provisions and incentives that may be used by small businesses and individuals. Among the more widely applicable tax changes in the Act are:

  • Tax credits for builders of energy-efficient homes and manufacturers of energy-efficient appliances.
  • A 10 percent tax credit for various means of making an individual's home more energy efficient such as replacing exterior windows and doors, and adding insulation. Note: this credit is capped at $500 and only $200 can be attributable to windows.
  • A $150 tax credit for replacing hot water boilers or furnaces with more energy efficient ones.
  • A $300 tax credit for replacing central air conditioners with more energy efficient ones.
  • Tax credits for hybrid and alternative powered vehicles.
  • A 30 percent tax credit (capped at $2,000) for solar water heaters. Note: water cannot be used for pools or hot tubs.

“As often occurs with tax provisions, ‘the devil is in the details,'” Scharin adds. “While clients will want their tax savings, accountants will need to calculate just how much those savings are – and catch the flack when clients find that the savings are not as large as they expected. Accountants will also need to advise their clients about timing expenditures to conform with effective dates of the provisions. Spend too early or too late and the tax breaks disappear.”

RIA's Complete Analysis of the Tax Provisions of the Energy and Transportation Acts of 2005 and Highlights of the Energy Tax Act of 2005 are already available to help accountants get a head start on understanding the changes that will begin going into effect when the President signs the new laws. RIA, part of Thomson Tax and Accounting, is the premier provider of technology and information to tax professionals in accounting firms and corporations.

“As always, RIA was able to post the information that is relevant to tax professionals, explaining it in clear and concise terms, almost immediately,” says Mark Schlageter, EVP and chief operations officer, Thomson Tax and Accounting.

For more information or to order either publication call 1-800-950-1216 or visit the RIA website.

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