Getting (Tax) Credit for Going Green

Reduce your income tax with residential energy credits

Happy New Year!  Its that time of year when many of us start thinking about federal income taxes – particularly if you plan on getting a refund.

Its great to get credit for doing something well.  And Uncle Sam wants to reward you for going green in 2009.  Get out your pens and paper, or just bookmark this post…. you may be able to reduce your tax liability through residential energy credits.

Some of the energy credits available for tax year 2009 were not offered in 2008.  These changes to the tax code, enacted as part of the American Recovery and Reinvestment Act of 2009, help you save on your “below the line” tax bill.

• Residential Energy Credits (Form 5695).  This is probably the most popular and well-known energy tax credit.  And actually, there are two credits.  The nonbusiness credit requires that you make energy-efficiency improvements to your home or property (perhaps you installed EnergyStar appliances or weatherstripping, or a new furnace?)  Review the form to determine how to claim a credit for part of the value of the cost, up to $1,500.  With the energy efficient property credit, you may be entitled to a portion of the costs you spent to install renewable energy systems, such as solar water heaters or wind turbines.  The IRS will allow up to 30% of the qualifying cost.
• Plug-in Electric Vehicle Credit (Form 8834).  If you purchased a qualifying vehicle after February 17, 2009, you may be able to claim up to a $2,500 credit.  Among other things, the vehicle must have been new, weigh less than 3,000 pounds, and be propelled by electricity from a battery.
• Plug-in Electric Drive Motor Vehicle Credit (Form 8936).  Claim between $2,500 and $15,000 in a tax credit if you started driving an “electric drive motor vehicle,” whether for personal or business use.
• Alternative Motor Vehicle Credit (Form 8910).  Get a credit for a portion of the manufacturer’s certification, or for a portion of the cost of converting a vehicle to a qualified hybrid, fuel cell or advanced lean burn technology vehicle.
• Alternative Fuel Vehicle Refueling Property Credit (Form 8911).  For those of you that maintain an alternative fuel vehicle refueling station, how about a tax credit up to $2,000?  If you use the property for businesses, you could claim up to 50% of the property’s cost to a maximum of $50,000!

Won't it feel great to owe less to the IRS?

Instead of deductions that factor into the total tax you may owe (say for charitable donations), credits come directly off the tax bill after its been calculated.

For example, let’s say that, after all your math is completed, the federal government determines your tax is $11,500.  With a tax credit of $1,500, your bill is reduced – dollar for dollar to $10,000.  Its a much more rewarding incentive than tax deductions (even the U.S. Department of Energy agrees!)

As a lawyer, I have to include a standard disclaimer.  Be sure to consult your own tax advisor or CPA for detailed advice and/or assistance on your federal income tax filing!

Getting a bit of green, for saving green is a great proposition!  Even in tax season.