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Energy efficient living saves money on your bills, but it also reaps benefits at tax time, which is just around the corner. With all the current and extended energy efficiency legislation mixed into the federal tax code, you may not even know that you qualify for tax credits and deductions. If you upgraded your home with energy efficient green fixtures this year, it’s time to take a look.
The federal tax credit for purchasing an energy efficient product or renewable energy system for your home varies depending on the product and when you purchased it (home improvements unfortunately do not apply to renters). On average, the credit is 30 percent of the cost over the period 2009-10. If you spent up to $5,000 on products for your primary residence, you can get $1,500 in returns. The products must be certified or achieve a specified efficiency, and the Energy Star logo alone doesn’t mean the product counts for a tax credit. More information, including how to apply for the credit, can be found here.
The credits can be applied for, among other things:
Additionally, homebuilders can claim a credit of $2,000 per certified energy efficient home they build.
But greening your home isn’t the only way to receive tax credits and deductions. If you bought a hybrid, electric, solar, or alternate fuel vehicle in or after 2009, the reduction can range from $250 to $7,500 depending on the type of vehicle. (Note: Credits reduce your taxes while deductions lower your taxable income.)
Hybrids purchased between December 31, 2005 and December 31, 2010 may be eligible for up to a $3,400 credit, while diesel vehicles purchased after December 31, 2005 may also be eligible for that credit. Alternative or flex-fuel vehicles, which use ethanol or natural gas, purchased between January 1, 2005 and December 31, 2010 may be eligible for up to a $4,000 credit, and plug-in hybrids, solar power, and all-electric vehicles purchased in or after 2009 may be eligible for up to $7,500 credit. Also, if you got your fuel-efficient car through the government’s Cash for Clunkers program, your $3,500 to $4,500 rebate is not considered taxable income.
Don’t forget that each state also has its own green tax breaks when filing your tax returns. For more state-by-state information, click here.
We all like to see a check in the mail after filing our taxes, and by investing in efficiency you can get some of the money back on your investment on top of the lower numbers on your bills over time.
Read more articles from the "It’s Easy Being Green" series