Making energy-efficient improvements in your home can drastically reduce your family’s carbon footprint since much of the energy used in our homes comes from the burning of fossil fuels at power plants. And while we all know increased energy efficiency means reduced energy costs in your home, did you know it can also translate into bigger tax breaks? Here are a few of the things you can do in 2010 to save more money and take advantage of lucrative tax breaks come next year.

Under the American Recovery and Reinvestment Act passed last year, homeowners who purchase qualifying energy-efficient products or a renewable energy system are eligible for a federal tax credit. The credit can be equal to 30 percent of the total cost, up to a maximum of $1,500. In addition, there is no income restriction for the credit and limits on individual items (as there was with the 2007 credit) are no longer in place. So that means homeowners can claim the full credit for windows, a new water heater, or whatever it is they need.

Replacing windows? Look for those with the Energy Star label to take advantage of the federal tax credit.

However, homeowners should be forewarned that not all products with the Energy Star label will qualify for the credit. Qualification for the credit depends on the manufacturer and qualifying products will come with a certification statement. Keep a copy of the statement, which you may need when it comes time to file your taxes.

If you’re looking for an even bigger tax credit, look no further than alternative energy. Homeowners who install solar water heaters, geothermal heat pumps or another alternative energy system qualify for a 30 percent tax credit with no cap. Or if you are in the market for a new car, purchasing certain hybrid vehicles can yield the tax credit as well. Once the manufacturer of qualifying vehicles sells 60,000 models, the credit will no longer be valid.

Visit the official Energy Star website to learn more about the energy efficient tax credit and which products or home systems qualify.