With tax deadlines creeping up on us, it's time to consider strategies that can lower your obligation to Uncle Sam. In previous articles, we've covered adjusting your withholding, maximizing contributions to retirement savings and planning for the alternative minimum tax.
Now it's time to consider something a little less technical: taking advantage of the IRS tax credits related to energy efficiency.
With oil prices running high, energy efficiency may be on your mind already. If so, the federal government has a few credits -- dollar for dollar reductions in your taxes -- in place that you ought to know about. Unless Congress decides otherwise, several of these credits expire at the end of the year, so if you want to take advantage you'd better act soon.
If you buy and install certain
energy-efficient products, such as replacement windows and storm doors, you can claim a tax credit for 10% of the cost, up to $500. (Unfortunately, the credit applies only to purchase cost, not installation.)
While many taxpayers are unaware that these credits exist, sales personnel at many home improvement stores are knowledgeable about which products qualify. Most Energy Star-certified products are eligible, but consult the fine print to be sure.
You can also receive credits for installing certain roofing products, as well as
high-efficiency heating and cooling equipment.
Bear in mind that in addition to saving money on your taxes, buying energy-efficient products will also reduce how much you pay to heat and cool your home. For example, if you replace single-pane windows with Energy Star-qualified windows, you'll save $125 to $450 a year, according to Energy Star.
If you want to take home-energy efficiency even further, you can install a solar energy system or a fuel cell system. Unlike energy-efficient doors and windows, the credits you receive for these home improvements are not subject to a $500 cap, and they're available through the end of next year.
Substantial tax credits are also available for buyers of some hybrid cars. Credits for hybrids from Lexus and
expired Oct. 1, but you can still
save some cash by purchasing new Chevy,
, Mercury and Saturn hybrids before the end of the year.
Again, since these changes trigger tax credits -- not deductions -- they can have a big impact on your bottom line with Uncle Sam.
Coming up next: Balance your portfolio
Michaela Cavallaro writes about personal finance, business and food from her home in South Portland, Maine.