Energy-Saving Home Improvements and Taxes  

Since 2006 was an election year, it's not surprising that lawmakers spent much of it creating and adjusting tax laws. Now, as taxpayers put these new measures into practical effect by filing their annual returns, many will find changes that produce some nice tax savings.

If you replaced your home's drafty windows last year with new, energy-efficient panes, make sure you file the long Form 1040, along with Form 5695, to get the corresponding tax credit. That's just one way to take advantage of the energy-efficient home improvement provisions included in the energy bill that took effect Jan. 1, 2006.  

Simple upgrades, such as the new windows or added insulation, offer relatively small tax breaks. You can claim more generous credits if you added solar water, heat or power systems to your house. If you didn't get the improvements in by the Dec. 31 deadline to claim the credit this year, you get another chance by completing the work this year; a couple credits also carry over into 2008.  

"What's great about the energy credits is that everybody can take them," says LeValley. "There are no income phaseouts. It's not about how much — too little, too much — you earn. It's about just making the right purchase."

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