When it comes to going green, people often think of tax incentives offered to large companies for using more efficient systems in their office buildings. However, a number of green tax incentives are available to individuals as well. Your answers to the following questions could make a notable impact on your tax deductions.
Did you buy a green vehicle?
If you recently bought a fully electric or plug-in hybrid vehicle, the federal government offers a Plug-in Electric Vehicle tax credit. The U.S. Department of Energy (DOE) website says that, for qualified vehicles, the minimum tax credit is $2,500, but can reach up to $7,500 based on the size of the vehicle’s battery — the credit is increased by $417 for every kilowatt-hour of battery capacity above 5 kilowatt-hours.
If you wait for too long to buy a plug-in vehicle, this credit could be reduced or unavailable, as it phases out based on the number of qualifying vehicles an automaker sells. This data can be found on the Internal Revenue Service website.
Did you install a renewable energy source in your home?
If you install certain renewable energy sources in your home (not necessarily your primary residence), you will also qualify for Residential Renewable Energy Tax Credit. According to the U.S. Department of Energy, this credit includes solar water heating systems (so long as they’re for the house and not a pool or hot tub), solar electricity, fuel cell electricity, small wind-powered electricity and geothermal heat pumps.
Before the phase-out period, which begins on January 1, 2020, you can claim a tax credit of 30 percent of the cost of installing these systems, with no maximum, and allowing excess credit to roll over to the next tax year. The cost includes labor for preparation, assembly, installation, piping and wiring.
Did you renovate your home?
Installing a whole energy system isn’t the only way that home renovations can result in green tax credits. As H&R Block points out, certain home improvements can actually qualify you for a tax credit. There are tax credits for installing certain ENERGY STAR-certified products, including air conditioners recognized as ENERGY STAR Most Efficient, certified metal and asphalt roofs with pigmented coatings or cooling granules and certified water heaters. In addition, there are credits for investing in adequate home insulation and installing energy-saving doors, windows and skylights. A full list of qualifying renovations is available on the ENERGY STAR website.
Are there local green tax incentives available?
Local tax incentives vary widely from city to city and from state to state. These can be anything from a township offering a small credit for green energy source installation to a utility company offering rebates for purchasing efficient appliances. DSIRE®, an initiative originally funded by the Department of Energy and hosted by the N.C. Clean Energy Technology Center at North Carolina State University, maintains a database of renewable and efficiency-related local incentives by state.
This is not a comprehensive list of green tax deductions, so to find all of the green tax programs you qualify for, look around on the Department of Energy website as well as your city, county and state websites.