ISTOCK PHOTO/ETHAN MYERSON

Now improving the energy efficiency of your home not only lowers your energy bills every month but pays off at tax time too! The Energy Policy Act of 2005 allows homeowners to claim a tax credit of up to $500 in 2006 and 2007 for home energy efficiency improvements.

For existing homes, the tax credit is 10 percent of the final cost of qualified energy efficient products for a maximum of $500.

Adding insulation to your home is one of the easiest ways to save money on your utility bills and qualify you for the energy tax deduction, according to the North American Insulation Manufacturers Association (NAIMA). Improved levels of insulation also increase comfort and make other energy efficiency improvements pay off faster.

You should keep your receipts when you purchase the insulation and other energy efficient products that qualify for the tax credit. You also need to get a certification statement from the insulation manufacturer clarifying that the insulation product installed actually qualifies for the tax credit. For the contingencies of qualifying for the tax credit, check the IRS guidelines.

For more information on energy efficiency, read Get Cash Back for Energy Improvements from the August/September 2006 issue of Mother Earth News, visit The Tax Incentives Assistance Project site, or read All About Insulation from the December/January 2002 issue of Mother Earth News.