Visit Gap, PA for Low Gas Prices
November 2005
Our lunch byte for this month is not you can buy gas for $2.20 a gallon in Gap, PA. You can buy gas for $2.20 a gasoline in Gap, PA, but that price is nothing special as you can buy gas all over Delaware at pre- Katrina prices. But high gas prices are a good tie in to this month's lunch byte. Home heating oil and natural gas are predicted to have Katrina- like price spikes this winter. But the good news is you can probably make up the increase in tax credits offered under the not well publicized Energy Tax Incentive Act of 2005.
You can obtain a maximum lifetime $500 credit for home improvements including:
· $300 tax credit for installing equipment that uses less energy to heat or cool your home: central air conditioners, heat pumps and water heaters
· $150 credit for energy-efficient gas or oil furnaces
· 10% of the cost, up to a $500 credit, on the amount spent to upgrade thermostats, caulk leaks or to stop energy waste.
· $200 credit for installation of new exterior windows, including skylights
· Various credits for purchase of certain new appliance including refrigerators, washers and dishwashers up to a $500 total.
In golfing terms, these credits are a $500 gimmee. In all likelihood, you will be buying these products over the next two years in the normal course of replacing things around the house. There are few limitations and the best part is there are no phase outs for high income tax payers. Improvements must however be to your primary residence. There are guidelines about what equipment and appliances qualify, so you must do your homework in the selection process. Visit
www.energystar.gov for information on home improvement products eligible for the credits and stores where they can be found.The Energy Tax Incentive Act of 2005 does not go into effect until 2006. The obvious inconsistency goes beyond the implementation date. Energy experts say the only thing that can be done to combat high home fuel costs this winter is to make sure your heating system is operating efficiently. As a result, home energy contractors are going to be extremely busy. You should not wait until the last minute to have your heating system repaired or upgraded. It makes little sense to make taxpayers wait until 2006 to install new equipment, but this is the law as written, so get your HVAC Company scheduled ASAP.
Finally, if you are more adventurous, there is a credit of 30% of the cost, up to a $2,000 credit, for solar-powered hot-water systems (but not for heating hot tubs and swimming pools).
On the automobile front, the tax breaks for buying a hybrid vehicle have been reconstructed as follows:
· There are two components to the credit, first being a fuel economy credit of up to $2,400 based on the car or light truck's efficiency vs. the comparable 2002 model.
· The second component is the conservation credit of up to $1,000 based on the vehicle's estimated lifetime fuel savings.
· Unlike the previous deduction, this credit is also available to taxpayers who lease qualifying vehicles.
Visit
www.fueleconomy.gov for details on the automobile credits.And, another break for high-income taxpayers: cash donations made during the post-Katrina period are exempt from the 3% phase-out of itemized deductions. Further, contributions to tax-exempts are limited to 50% of the taxpayer's adjusted gross income, with any excess carried over to future years. The new law removes the 50% limitation for all cash donations made between August 28, 2005 and December 31, 2005.
Call Diane Burke at Cover & Rossiter (302) 656-6632 or e-mail at DBurke@CoverRossiter.com for help with your 2005 tax planning needs.