Green tax incentives for consumers
There's still time to take advantage of the many green tax incentives available to consumers.
Mon, Nov 30 2009 at 8:00 AM EST
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Photo: pavlen/iStockPhoto Also on MNN: Tax breaks for businesses
There is one month left in 2009, which leaves you plenty of time to take advantage of the green tax incentives available to consumers. While some of these tax credits or deductions have been available for several years, many were created as part of the American Recovery and Reinvestment Act.
Residential energy-efficiency
A common theme among green-related Recovery Act programs is the importance of weatherization projects. When homeowners can create a more energy-efficient property, they save money on energy bills and reduce their greenhouse gas emissions. While many weatherization grant programs are dedicated to energy-efficient upgrades for low-income housing units, there are also programs tailored toward homeowners who have the means to upgrade their property.
The following types of energy-efficient products may be eligible for a 30 percent tax credit, up to $1,500:- Biomass stoves
- Advanced main air circulating fan
- Air source heat pump
- Central air conditioning
- Gas, propane, or oil hot water boiler
- Natural gas or propane furnace
- Oil furnace
- Home insulation
- Reflective roofing
- Non-solar water heaters
- Energy-efficient windows, doors and skylights
- Storm windows and doors
These products must be installed on an existing, primary residence. New construction projects as well as rental property upgrades will not qualify for the tax credit under this plan. Although 2009 is coming to a close, these tax credits are valid for projects completed through Dec. 31, 2010.
In addition to the above program, there is a series of tax credits available for energy-efficient upgrades made on existing homes and new construction projects as well as second or vacation homes. As with the previous program, rental property does not qualify for these tax credits.
The following items are eligible for a 30 percent tax credit with no maximum credit through Dec. 31, 2016:
- Geothermal heat pump
- Residential wind turbines
- Solar water heaters
- Solar panels
The final tax credit program offered to consumers through the Department of Energy EnergyStar program is for residential fuel cell installations. Fuel cell products that have the capacity to produce at least 0.5 kilowatts of power may be eligible for a $500 max credit per 0.5 kW.
For specific details about these programs, visit the Federal Tax Credits for Consumer Energy Efficiency site.
Hybrid and clean diesel vehicles
If you’re in the market for a new vehicle, purchasing a hybrid or clean diesel vehicle may help you save thousands on your taxes. Unfortunately, the most popular hybrid, the Toyota Prius, is not eligible for a tax credit. Tax credits for hybrids are phased out after an automaker has sold 60,000 eligible units. For Toyota and Lexus models, this phase out began on Oct. 1, 2006.
However, there are still three automakers that sell tax credit-eligible hybrid vehicles: Ford, General Motors and Nissan. Due to the popularity of the Ford Escape Hybrid, Ford is already in the tax credit phase-out process. If you purchased an eligible Ford hybrid prior to April 1, 2009, you may be eligible to take the full credit amount. Ford hybrids purchased between April 1, 2009, and Sept. 30, 2009, are eligible for a 50 percent credit and eligible Ford hybrids purchased prior to March 31, 2010 will be eligible for a 25 percent credit
Certain hybrid models from General Motors and Nissan are still eligible for the maximum tax credit amount. General Motors models on the list include the popular 2010 Chevrolet Malibu Hybrid ($1,550 tax credit) and the 2010 Silverado Hybrid ($2,200 tax credit). If you’re in the market for an import, the 2010 Nissan Altima hybrid is eligible for a $2,350 tax credit.
For more information on hybrid tax credits, view the IRS’ list of eligible model year 2010 hybrids.
Hybrid vehicles aren’t the only fuel-efficient autos eligible for tax credits; certain clean diesel-powered engines may also qualify. The award-winning Volkswagen Jetta TDI sedan and SportWagon are both eligible for $1,300 in tax credits.
The Mercedes-Benz BlueTEC line, as well as models from BMW and Audi, are also eligible for a fuel-efficient vehicle tax credit. Details are available on the FuelEconomy.gov website.
First-time homebuyers
Due to overwhelming popularity, the first-time homebuyers $8,000 tax credit has been extended to buyers who sign a contract by April 30, 2010, and close by June 30, 2010. The program has also been expanded in several ways. First, the maximum income levels have been raised to a cap of $125,000 annually for single buyers and $225,000 annually for a married couple.
The second expansion allows existing homeowners to also qualify for this credit. As long as you have owned an occupied your current residence for at least five out of the past eight years, you can claim a $6,500 tax credit for a new primary residence purchased and closed on by June 30, 2010.
Although new construction properties are eligible for the tax credit, consider purchasing an existing property. Constructing a new home uses more environmental resources than purchasing an existing home. If you buy a pre-owned home in an area that was hit hard by the housing bubble burst, you will also help reduce the inventory of foreclosed homes on the market. Ultimately, this will help the local economy recover more quickly from the housing crisis.
For more information on the first-time homebuyer tax credit, visit the IRS website.
State tax incentives
In addition to the many federal tax credits and deductions available, many states have set up their own green tax incentive programs. The Database of State Incentives for Renewables & Efficiency (DSIRE) website provides a searchable database of state-specific tax incentives.
For example, in Arizona if I were to purchase a qualifying wood stove, I could be eligible for up to a $500 tax deduction. Georgia residents who purchase a solar hot water heater may be eligible for up to a $2,500 personal tax credit on their state income taxes.
The benefit of researching green tax credits available in your state is the combined savings. Georgia residents may be able to completely offset the cost of a solar hot water heater when combining the federal and state tax credits.
Charitable contributions
You don’t necessarily have to spend money to take advantage of the green tax incentives available. Charitable contributions are a great way to reduce your tax bill while helping out those in need this year. With unemployment rates at an all-time high and foreclosure rates setting records in some parts of the country, the need for charitable donations is extreme this year.
One of the tenets of going green is to reduce, reuse and recycle. This means it's time to go through your closet and gather any good used clothing that you no longer wear and donate it to a charity. There are large international charities in need and there are also smaller charities that serve your local community. All charities are in need of more donations this year, regardless of the community they serve.
While you are welcome to donate your clothing and other household items to the charity of your choice, I wanted to share a few things that we do in our household. First, I donate any business wear to a local women’s shelter that is designed to get women out of abusive situations and into the work force so that they can be self-supporting. Providing these women the opportunity to have a professional wardrobe, without spending money, is a great way to help get them on their feet.
Another thing we do in our family is to involve the children in the process. Each year about this time, I sit down with both of my children and we go through their toys, books, stuffed animals and clothing and decide what they really want to keep and what might find a better home elsewhere.
Although I started this when my children were too young to understand the process, now that they are older they look forward to going through their items and picking out toys to share with other children. Again, we take many of these items to a local women and children’s shelter.
Whatever charity you ultimately choose, it is important to obtain a donation receipt so that you can claim this contribution on your 2009 tax return. There are different rules for noncash donations of under $5,000 and those with a value of more than $5,000. For more information on noncash charitable donations, download IRS Form 8283 (PDF).
Although there are a wide variety of green tax incentives detailed in this article, there may be others that you qualify for. As is always the case with taxes, it is important to consult your accountant or tax professional as your financial situation may alter your eligibility for these green tax incentives.
If you're a business or commercial property owner, find out how you can save on your taxes by reading Green tax incentives for businesses.
Photos: runneralan2004/Flickr, Volkswagen
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Comments
Marisa
03/12/2010 20:56 PM
Hi, I was just at the Toyota dealer and the salesperson told me there was a tax credit on Prius. Is he wrong, or did the policy change?
mhincha
03/12/2010 22:48 PM
Hi Marisa,
This is the first that I've heard of a tax credit available on the Prius. The original tax credits offered on alternative fuel vehicles were designed to phase out once a manufacturer sold 60,000 hybrids - across their entire product line. So all of the hybrids sold under the Toyota or Lexus brands counted towards this 60,000 figure. So Toyota's phase-outs began in 2006.
Here is a link to the IRS website with qualified model year 2010 vehicles: .... More
Allen H.
12/10/2009 11:40 AM
This article is a little confusing because it sounds as if you only have until the end of December to start these energy conservation projects if you want a tax credit (but can complete them next year.) In fact, you don't have to start your projects in 2009. You have 2010 as well.
Go to the government website at http://www.energystar.gov/index.cfm?c=tax_credits.tx_index for.... More
mhincha
12/10/2009 11:51 AM
Hi Allen, Thanks for your comment. In order to claim these on your 2009 taxes, you'll need to do the projects this year but you're right - several of these incentives are available through the end of 2010 and even more through 2016. This is a good tool to use to plan your 2010 home improvement projects. :)
