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Energy Tax Incentives Act of 2005
 

Signed in August 2005 by President Bush, this tax bill contains many tax incentives relating to energy use and production.  For individual consumers, the bill also creates tax credits for energy-efficient vehicles and residential energy improvements.  The following summary provides a broad overview of the available credits. 

• Hybrid Vehicles
  Beginning in 2006, the credit for purchase of a new, qualified hybrid vehicle will be based on two components -- fuel economy and conservation.  The list of qualified vehicles and their credit amount can be found on the Internal Revenue Service website, by putting "Hybrid Cars" in the search box on the home page.  This credit has a "phase-out" period based on number of vehicles sold for each manufacturer.
   

• Lean-Burn Technology Vehicles
  These are passenger cars and trucks with an internal combustion engines using a direct injection of a fuel mix with a higher-than-normal percentage of air.  Some new diesel cars that qualify for this credit are to be introduced in the US market.  Like with hybrids, the tax credit will be set for each qualifying model with the maximum being around $3,400.  This credit will also have a "phase-out" period like the hybrid vehicle.
   

• Fuel-Cell Vehicles
  This credit also has two parts.  The first is a flat amount based on the vehicle's weight.  The second part will be based on the vehicle's fuel-efficiency improvements compared to 2002 models.  The combined credit could be as high as $12,000 for this rare type of vehicle.
   

• Alternative Fuel Vehicles
  These are cars and trucks that run solely on compressed or liquefied natural gas, liquefied petroleum gas, hydrogen or any liquid that is at least 85% methanol.  The maximum credit is likely to be around $4,000.
   

• Residential Energy Improvements
  This credit applies only to energy-saving improvements made to your primary personal residence in 2006 and 2007, and there is a $500 lifetime limit.  The credit you can claim each year will be the sum of the following:
  
  10% of the following qualified energy efficiency improvements
       Metal Roofs coated with Heat-reduction Pigments
       Exterior Doors
       Exterior Windows and Skylights ($200 maximum lifetime credit)
       Insulation Materials designed to reduce heat loss or gain
  
  100% of expenditures for qualified residential energy property
       Qualified Electric Heat Pumps, Electric Heat Pump Water
           Heaters, Geothermal Heal Pumps and Central Air
           Conditioners ($300 maximum credit)
       Qualified Natural Gas, Propane and Oil Furnaces and Qualified
           Hot-Water Boilers ($150 maximum credit)
       Advanced Main Air Circulating Fans ($50 maximum credit)
   

• Residential Energy Equipment
       An additional tax credit will be available for up to 30%
           of the cost of:
            Qualified Solar Water-Heating Equipment ($2,000 maximum
                credit)
            Qualified Electricity Generating Solar Photo-Voltaic Property
                ($2,000 maximum credit)
            Qualified Fuel-Cell Property ($500 maximum credit for each
                .5 kilowatt of capacity)

Oregon continues to offer energy credits for purchases of hybrid vehicles, qualifying appliances and other residential energy improvements.  The Oregon Department of Energy's website contains important information, instructions and the forms needed to apply for the credits.  Please note, it is the consumer's responsibility to apply for the credit prior to taking it on the Oregon tax return.