Friday, September 17, 2010
Your Guide to Green Tax Breaks
Energy Efficient Home Improvements Can Help Your Bottom Line at Tax Time!
As you probably know, the Federal Government has been offering tax credits up to $1,500 for homeowners who make energy-efficient improvements to their homes -- everything from installing energy-efficient heating and air conditioning systems to new water heaters to new windows, doors and roofs. Not only are these incentives a great way to save cash now and in the future, they're stimulative to the economy and help improve our environment.
But there are some things about these tax breaks you probably don't know. For one thing, the $1,500 tax credit is currently set to expire on December 31, 2010--and that deadline is rapidly approaching. Some people think that means they only need to purchase a new energy-efficient improvement by that date to get the tax credit. NOPE. In order to get the tax credit, you not only need to make the purchase, but you need to have it INSTALLED by December 31, 2010. So if you've been thinking of investing in a new energy-efficient heating system, air conditioning system, hot water heater or any green home improvement, TIME IS REALLY RUNNING OUT. Act now!
Another little known fact is that for higher-end renewable energy sources like solar or geothermal power, you can claim a tax credit of up to 30% of your cost. Since these alternative systems are usually much more expensive to install, these credits can seriously offset your costs. Furthermore, this high-end credit can be used toward the Alternative Minimum Tax liability and unused credits can be carried over to the next tax year.
Naturally, not every heater, air conditioner or other piece of equipment qualifies for the $1,500 tax credit and other green tax breaks; there are restrictions. So before you buy, make sure you have all the facts. You can find a complete list of all the federal green tax credits as well as full details and qualifications for each at http://www.energytaxincentives.org/.
Green Tax Breaks in YOUR State
In addition, most states now offer their own green tax credits on top of the federal program. Unfortunately, the current economic climate has dramatically affected many state green programs. Because, unlike the federal government, states are not allowed to operate with a budget deficit, many states are having to make spending cuts that are likely to impact or even eliminate state tax credits altogether. This has made several state programs very selective about when and how credits are offered.
If your state does offer a generous green tax break, be sure to do your homework to make sure you’ll qualify before undertaking a big project. Some states, like New York and California, limit green credits based on project completion dates and other qualifying criteria.
A comprehensive list of green tax credits organized by state is available at http://www.dsireusa.org/.
Additional Considerations About Green Tax Breaks:
Don’t assume anything. Not all green improvements are subjected to federal or state tax breaks and there are certain qualifications—like purchasing approved equipment or using a certified contractor—that have to be met. Get all the facts before you begin a project.
Many green tax credits are available only to contractors, not homeowners or do-it-yourselfers. Talk to a trusted professional about your options and shop around to find someone willing to pass along their tax break to you in the form of lower costs.
Get out your calculator and figure how state and federal credits will work together to impact your project’s bottom line. A renovation that seems completely out of reach for your budget may cost significantly less when you combine both state and federal incentives. On the other hand, you may not be getting as much of a break as you think if your project only qualifies for one and not the other.
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