Last week I blogged about our home repairs blowing the budget.  But I also mentioned the tax credits were incentivizing me big time.  Then I realized I might want to explain why the tax breaks were so awesome.

The Federal Tax Credits for Energy Efficiency can be found at this Website.  Now everyone is limited to $1500 tax credit for 2009 and 2010.  How this comes about?  You get 30% back on whatever you spend on qualifying energy efficient products.  It doesn’t matter if you make $25k, $100k, etc.  You get 30% of the cost back up to a maximum of $1500!  So basically if you spend around $5k on any home repairs that are qualifying energy efficient you will maximize your tax credit.

This is a TAX CREDIT.  What that means?  It’s like you paid Uncle Sam $1500 in taxes!  Wowie!  Instead of paying $1500 in home repairs, I just paid Uncle Sam.  A dollar for dollar tax credit!

This is much better than a deduction which reduces the amount of taxable income, by say $5k.  But depending on your tax bracket, most people (including myself) aren’t in the 30% tax bracket.  So I get more bang for my buck using the Federal Tax Credits and so will most people.

So when given a choice, typically the better decision is a tax credit versus a tax deduction, like the Lifetime Learning Credit versus the Tuition Deduction!

So the Federal Tax Credits for Energy Efficiency sure were nice this year!