TULSA, Okla. – The last decade has seen a growing interest in “going green,” or taking steps to preserve natural resources and protect the environment. But did you know that there can be tax benefits when you take environmentally friendly steps, such as minimizing energy usage? The Oklahoma Society of Certified Public Accountants explains what you can do to help the environment and cut thousands of dollars off this year’s tax bill as well as your home energy costs.
Individuals get new incentives.
Last year’s American Recovery and Reinvestment Act extends a tax credit (the Nonbusiness Energy Property Credit) that encourages individuals to make energy-efficient home improvements. While the government has previously offered this incentive for making energy friendly upgrades, the credit percentage and the maximum credit allowed have been increased. You can now receive a tax credit for 30 percent of the total cost of qualifying improvements, in some cases including the price of labor to install the products. A maximum credit of $1,500 is allowed for all the improvements that are put in place in 2009 and 2010. To qualify for the credit, you must make the improvements to your principal residence between Jan. 1, 2009, and Dec. 31, 2010. The credit does not apply to new construction.
What kinds of improvements are covered? They include insulation and energy efficient windows, doors and skylights, some roofs and a variety of other specified residential energy property.
All alternative energy choices have benefits.
Those aren’t the only incentives available. Another energy tax credit (the Residential Energy Efficient Property Credit) applies to your purchase of qualifying alternative energy equipment, including solar electric systems and water heaters, geothermal heat pumps and wind turbines. The credit is allowed for up to 30 percent of the cost of qualifying equipment, including labor in most instances, with no maximum limit on the amount. This credit expires on Dec. 31, 2016, and it is good for existing homes and new construction, as well as both principal residences and second homes. However, the credit does not apply to rental residences.
Check the labels.
The products or materials used must meet the Internal Revenue Service standards for energy efficiency, which have been raised for this new credit. As a result, be sure to check for a manufacturer’s certification attesting to the fact that the products you use meet IRS standards. Consumers may be familiar with the Department of Energy’s Energy Star® label that can be found on many appliances, but not all of these products qualify for these credits (although there are often separate state rebates for products with this label).
Get the facts.
You can claim both credits on the tax return you file this year, so be sure to ask your CPA about the details and how to qualify. Tax credits lower the tax you have to pay on a dollar-for-dollar basis, so they are well worth claiming if you qualify.
There are many savvy financial steps you can take that can help fatten your bank account or cut down on your expenses. If you want to learn more about them vwww.KnowWhatCounts.org for more tax advice or for a free referral and free consultation.