Energy efficiency and sustainability can have a big impact on your wallet and your carbon footprint. Environmental issues are an important concern and the government wants to help you make the most of your personal sustainability efforts.
Besides lowering utility bills, the purchase and installation of these products can come with significant tax benefits. Check out these 3 tax breaks to help you take advantage of long-term savings and short-term tax benefits.
- Residential Energy Property Credit – This tax credit was originally one of a 2-part credit designed to help encourage more energy efficient modifications. While the Nonbusiness Energy Property Credit (part 2) has expired, the Bipartisan Budget Act of 2018 reinstated the Residential Energy Property Credit until 2021. This may qualify you for a credit of up to 30% of the cost of purchase and initial installation for solar, wind, geothermal heat pump, and fuel cell energy sources. This credit is not limited to one residence and can be applied to existing structures or new construction but does have some specific stipulations.
- Plug-in Electric Drive Vehicle Credit (IRC 30D) – Uncertain gas prices are only one reason to consider battery powered cars and their impact on your wallet. Thanks to this tax credit, the IRS may allow you to claim a credit of between $2,500 and $7,500 per qualified vehicle in the year that the vehicle was purchased and first used. This credit can be taken by qualified individuals and businesses. Be aware that this credit phases out for each manufacturer once they have sold 200,000 qualifying vehicles in the United States. This number is determined cumulatively as of Dec 31, 2009. So, if you’re interested in buying an electric vehicle, be aware that the more popular manufacturers may have already maxed out these credits.
- Manufacturers’ Energy Efficient Appliance Credit – This credit applies to businesses that manufacture energy efficient appliances (dishwashers, clothes washers, and refrigerators). It was established under the Tax Relief and Job Creation Act of 2010. With this credit, manufacturers may claim a set dollar amount for each qualified appliance manufactured within the tax year. The amount is determined by the type of appliance, energy efficiency, and amount of water used (if applicable).
If you made steps to improve your energy efficiency in 2018, you don’t want to miss out on these valuable tax credits. You can check out the full information of tax credits and deductions online at IRS.gov, and we highly recommend working with a tax professional to help make sure you are maximizing your credits and deductions.