Saturday, June 11, 2011

Energy Tax Credits

One of the easiest ways to reduce taxes is to qualify for tax credits. Tax credits, of course, are preferable to tax deductions because the credits are deducted from the actual amount of taxes you pay whereas a tax deduction might lower your taxes, on average, by 25%  of the amount deducted.

This blog has already discussed the Lifelong Learning Credit for higher education. Another source of tax credits is for money spent to buy energy-saving appliances or to install geothermal heating, solar power or wind power.

Here is a link to a government website detailing tax credits. The rules are complex but there seems to be a maximum lifetime credit of 500 dollars for buying energy-efficient appliances. However, more complicated projects like installing geothermal, solar, or wind power systems allow credits of up to 30 percent of the purchase price and have no upper limit. On the one hand, these systems are expensive. Prohibitively so. On the other hand, if the international political situation leads to dramatic increases in energy prices or, perish the thought, oil embargoes, buying these systems may become the best thing you ever did. An added consideration is that, to the extent that are current wars are about oil and energy supply routes, making this country more energy-efficient lessens the possibility that the American people will accept wars for those reasons.

Here is a youtube video on geothermal systems that you might find interesting:


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