New energy law offers complex set of tax breaks
Date: Sunday, August 21, 2005 @ 16:04:31 UTC
Topic: Legal
KATHY KRISTOF
TRIBUNE MEDIA SERVICES
Last Updated: August 21, 2005, 08:45:21 AM PDT
Thinking about buying a hybrid car or installing energy-efficient windows in your home? You might want to wait. But don't wait too long.
The energy bill recently signed into law will usher in lucrative tax breaks for buyers of fuel-efficient cars and energy-saving home improvements starting in January.
The catch is that it's not always easy to figure out how much of a tax break you might receive. And if you wait too long, you might not get anything.
"This is something of a mess," said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill.-based publisher of tax information.
"There are a few complicating factors," Internal Revenue Service spokesman Eric Smith added.
Some of the biggest tax incentives are for buyers of hybrid cars, which typically use both electric and gasoline power, and "alternative fuel" vehicles. Current tax law provides these buyers with as much as $2,000 in tax deductions. The new law will replace the deductions with tax credits that can reach $3,400.
Tax credits are significantly more valuable than deductions because deductions merely reduce the amount of income that's subject to tax, but a credit reduces the tax owed — on a dollar-for-dollar basis.
Consequently, a $2,000 deduction saves a person in the 30 percent federal tax bracket $600 in taxes, and a $2,000 credit saves $2,000.
However, figuring how much of a credit a hybrid-car buyer might receive next year is a bit tricky.
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Read the whole article here: http://www.modbee.com/business/story/11118300p-11872916c.html
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