The most recent federal energy legislation ? the Energy Policy Act of 2005 ? makes home energy improvements more affordable than ever through income tax credits. Whether you simply add insulation or go so far as to install a solar power system, these credits can help you save money in the short term on improvements that will help save you even more money over the long term. The credits range from $50 to $2,000, and can help offset the costs of simple upgrades or large-scale projects.

Tax credits such as these are the best form of tax incentives ? dollar for dollar, they reduce the amount of federal income tax you owe. For example, if you owe $2,000 in federal income tax, but you bought a solar-water heating system, for which you can claim a $1,200 tax credit, you would only owe $800 in taxes. Factor in the state and local credits or rebates that may be available in your area, as well as your annual energy conservation, and you could save thousands more.

To be eligible for these credits, homeowners must make the improvements during 2006 or 2007, though Congress is considering extending the tax credit on solar energy property and qualified fuel cell property through 2015 as part of the Securing America's Energy Independence Act. To show your support for this bill, write to your representatives in Congress.

For more information, see 'Get Cash Back for Energy Improvements' in the 'Mother Earth News Guide to Affordable and Sustainable Homes' Summer 2006 issue, or visit The Tax Incentives Assistance Project site or download a PDF from the Internal Revenue Service.