Manny Davis is a tax blogger and tax accountant, who provides assistance to taxpayers facing an IRS tax levy, tax lien, and other IRS tax problems. Feel free to visit his tax blog for additional tax tips.

Homeowners looking to lower both their winter heating bills and their 2010 tax bill may be able to take advantage of IRS energy-saving tax credits before the end of year. The American Recovery and Reinvestment act of 2009 expanded the home energy property credits and resident energy efficiency property credits. Moreover, many alternative energy/hybrid tax credits are still available. Tax credits are used to reduce the amount of taxes you owe or increase the amount of your tax return by the amount of the tax credit – it’s similar to applying a gift card or a coupon to a purchase.

Home Energy Property Credit

You can save 30% of money spent on qualified energy-saving improvements to your home, up to a maximum of $1,500 through December 31, 2010. If you spend $5,000 in 2010 on qualified energy-saving home improvements, you would be eligible for the full $1,500 credit on your tax liability, although it may vary depending on other credits you claim. In addition to the tax credit benefits, homeowners making these energy efficient improvements will also experience the long term benefits of reduced costs for heating and cooling their home. Examples of qualifying home improvements for this tax credit include:

• Energy-Efficient Windows, Skylights, and Doors with a U factor less than or equal to .30 and SHGC less than or equal to .30 or lower. Installation costs are not eligible for tax credit.
• Install Insulation – Rolls, rigid boards, pour-in-place, blow-in fibers and expanding spray bulk insulation products may qualify, as well as air seal products that come with a Manufacturers Certification Statement (weather stripping, caulk for sealing, house wrap, spray foam in a can). Installation costs are not included in the credit.
• Metal or Asphalt Reflective Roofing with energy start qualifications. Installation costs are not eligible for tax credit. Biomass stoves – with a thermal efficiency rating of 75% or higher will qualify for tax credit, as will the cost of installation.
• Central Air Conditioning, Ventilating, Heating – Installation costs for these units apply toward the tax credit, and include air circulating fans, central air conditioning, water boilers, air source heat pumps, natural gas, propane and oil furnaces. water heaters – energy factor greater or equal to .82 OR thermal efficiency rating of at least 90% qualify, whether the water heater is gas, oil or propane. Electric water heaters with energy factor greater than 2.0 qualify. Installation costs are eligible toward tax credit.

The tax credit generally applies to the cost of the materials and products only, and not to the installation expenses. You must already own the home and it must be your principal residence. Rental properties are not eligible. For more information, visit energy star.

Alternative Fuel and Hybrid Vehicles Tax Credit

A second energy efficient tax credit available to taxpayers who plan on purchasing a car is the alternative fuel/gas-electric hybrid tax credit. This tax credit is determined by the vehicle make and model and whether the manufacturer sold sixty-thousand vehicles. If you would like to know whether a vehicle you are considering is eligible for a tax credit, you can visit the IRS website or theUS Dept of Energy. Realize, this is for new vehicles only, bought or leased. Your dealer or the car manufacturer will be able to issue paperwork that certifies the dollar amount you may claim on your tax return.

How to Claim Residential Energy Tax Credits

You can claim these tax credits on your 2010 Federal income tax return. You do not need to itemize deductions to claim the credits. Simply use IRS Form 5696 for Residential Energy Credits to calculate the amount of your credit, and file it with your income tax return.