"Tax credits: Getting some green back"
There are a number of great opportunities to save money on your taxes while helping to reduce your energy consumption. CAP has the story.
The federal government offers a variety of energy efficiency tax credits to consumers who purchase housing upgrades or vehicles that reduce energy usage and carbon output. These tax credits result in much greater savings on your tax bill than tax deductions. That’s because you only save a percentage of a deduction while the entire value of the tax credit is subtracted from your tax liability.
Even if you took advantage of energy efficiency tax credits in 2010 it is important to keep up-to-date with which credits are currently available. The number and size of energy efficiency tax credits has changed significantly since last year. And though a number of tax credits made available through the Recovery Act have been phased out large tax credits remain available for home upgrades made in 2011, with some credits extending until 2016.
For instance, certain types of structural upgrades are eligible for tax credits worth 10 percent of the upgrade’s value, up to $500. These upgrades include energy efficient insulation, roofing, windows, and doors. Biomass stoves, high-efficiency HVAC systems, and high-efficiency water heaters also qualify.
The tax credits are even higher if you’re looking to take your home off grid power. Geothermal heat pumps, residential wind turbines, and solar energy systems can qualify you for a tax rebate of 30 percent of the cost of the system (including installation), with no upper limit.
Residential fuel cells, which can be used to help power your home, have slightly different requirements. The government will cut your taxes by 30 percent of their cost, up to $500, for every 0.5kW of energy the system produces. How much of a rebate you can receive therefore depends on how much capacity the fuel system has.
A final set of credits deals with cars. With a few plug-in hybrids and electric cars coming to market, most notably the Nissan Leaf and Chevy Volt, the federal government is offering a whopping $7,500 tax credit to help defray the cost of purchasing the vehicle. This credit helps bring the cost of the Leaf and Volt down to the level of an average family sedan.
Energy Star, an energy ratings program under the Environmental Protection Agency, publishes a comprehensive list of available tax credits, as well as their eligibility requirements. Keep in mind that many of the housing upgrades have to be Energy Star certified in order to be eligible for the tax credit. For car tax credits, the U.S. Department of Energy also lists in greater detail which vehicles are eligible.
The credits mentioned in this article are just the federal credits, too. Many states also offer similar credits that can reduce your tax payment even further. And thanks to the Database of State Incentives for Renewables & Efficiency, finding out what credits your state offers is easy.
Upgrading your house in such a fashion also serves as an investment. You save money on your taxes while making your home more energy efficient, which will reduce your water, electric, and gas bill as well.
You’ll be seeing green in more ways than one by capitalizing on these credits while they’re still available.
– A CAP repost.