Mark Ridenour has been remodeling homes in the Lawrence area for 26 years now, and he’s getting extra satisfaction these days by sharing a bit of good news with clients when it comes to recouping some of their remodeling costs.

Energy-efficient upgrades, after all, can crank out relatively significant savings when tax time rolls around.

“Everyone wants to save money, and it makes it a little bit easier to force down that $10,000 improvement or whatever it is,” said Ridenour, president of Natural Breeze Remodeling in Lawrence. “Whenever you can get something back, it’s like having a coupon at the store, or a rebate for buying gas.

“It makes it a little more attractive.”

With fuel and other energy costs skyrocketing last year, consumers who purchased energy-efficient home improvements or hybrid vehicles for the garage in 2006 can take a tax credit – one of the tax code’s biggest prizes.

Credits amount to pure gold for the taxpayer because they are a dollar-for-dollar reduction in tax liability, whereas a tax deduction reduces only the income against which tax is assessed.

Many home improvements can qualify for the residential energy credit. Among them are insulation, certain water heaters, air conditioners, fans, furnaces, skylights, exterior windows and doors, solar panels and metal roofs with pigmented coatings designed to reduce a home’s heat gain.

10 percent credit

The credit is usually 10 percent of the cost, though there may be separate limits for specific devices. For example, up to $50 can be claimed for a main circulating air fan and up to $150 for a natural gas, propane or oil furnace, or hot water boiler. No more than $200 of the credit can be for windows.

The credit is limited to $500 for the 2006 and 2007 tax years combined. So if you claim the entire $500 credit for 2006, you won’t get the credit for 2007.

To be eligible for a residential energy credit, the device has to be “qualified energy property,” meaning it must meet criteria established by the 2000 International Energy Conservation Code and its supplements or, for windows and certain other items, bear the Energy Star label.

How do you know if your improvement meets the test? The Internal Revenue Service permits you to rely on the manufacturer’s claim.

“You really are going to have to rely on the promotional material you get from the manufacturer,” said Bob Scharin, senior tax analyst from Thomson Tax & Accounting, who edits a monthly journal for tax professionals. “The IRS guidance says you can rely on that. If the IRS later finds that there were inaccuracies, they can fine that manufacturer.”

“Save your documentation,” says Mark Steber, vice president of tax resources for Jackson Hewitt Tax Service, which has 6,000 tax preparation locations across the country. “Many companies who provide these types of property have placed certifications on their Web sites. Coupled with proof of purchase, you should be in good shape.”

Energy Star list

Donna LeValley, contributing editor of J.K. Lasser’s income tax guide, suggests taxpayers check the Energy Star Web site at www.energystar.gov for information about energy-saving home improvements. Energy Star is a joint program of the U.S. Energy Department and Environmental Protection Agency. The Energy Star label indicates a device meets government energy efficiency guidelines.

Be warned, this credit isn’t intended to apply to household appliances like dishwashers or refrigerators, even if they bear the Energy Star label. It’s only for home improvements that reduce a home’s “heat loss or gain,” according to the law.

Ridenour, whose business replaces all windows and doors for one or two houses each month, said that about half of his clients are aware of the tax advantages of making energy-efficient improvements. The others end up being pleasantly surprised that credits – essentially partial refunds on their investments – are there for the taking.

He provides customers with the paperwork they need to determine the credits they can claim. While taxpayers don’t need to submit any of the supporting documentation with their tax returns, they must submit Form 5695 showing the credit calculation.

“We give good documentation,” Ridenour said. “It’s easy to apply for it.”

The IRS allows taxpayers to take a credit of 30 percent of the cost of a solar panel, solar water heater or fuel cell power plant to heat their homes, up to a maximum credit of $2,000. One limitation: No part of such a system can be used to heat a pool or hot tub.

Hybrid credits

There’s another energy credit in the tax code for hybrid or alternative-fuel vehicles.

Taxpayers who bought a new hybrid gas-electric car or truck in 2006 are eligible for a credit that depends on the vehicle’s fuel economy, weight and technology.

Complicating the picture is the fact that the credit is reduced on a quarterly schedule after the quarter in which the manufacturer reaches sales of 60,000 of all its hybrids and alternative fuel vehicles.

The popular Toyota Prius, for example, originally qualified for a top credit of $3,150. On Oct. 1, after Toyota reached the 60,000 hybrid vehicle mark, the Prius credit fell to $1,575.

Taxpayers don’t have to worry about calculating the credit themselves or figuring out whether the manufacturer has reached the 60,000 mark.

Instead, go the IRS Web page http://www.irs.gov/newsroom/article/0,,id=157632,00.html for a list of each qualifying vehicle and its available credit. Models marked with a small cross (+) have already had their credits reduced because the manufacturer has sold 60,000 qualifying vehicles. The IRS says it updates the Web site constantly, so the figures on the Web page should be accurate.

File Form 8910, “Alternative Motor Vehicle Credit,” when claiming this credit.