What Your Clients Need to Know About Green Tax Credits

Tax Law and News Green energy

Turning off the lights when you leave a room and keeping a moderate finger on the thermostat can help save you money, as well as preserve the environment. Other “green” actions include recycling, carpooling and using rechargeable batteries. To add to your clients’ out-of-pocket savings, the federal government provides some tax incentives for spending money on energy-efficient products. Here is an assortment of green-based tax credits you can share with your clients and prospects. 

Residential Energy Efficient Property Credit

This tax credit helps individual taxpayers pay for qualified residential alternative energy equipment, such as the following:

  • Solar hot water heaters.
  • Solar electricity equipment.
  • Geothermal heat pumps (expired at the end of 2016, but may be extended by the government).
  • Wind turbines (expired at the end of 2016, but may be extended by the government).
  • Qualified fuel cell property (expired at the end of 2016, but may be extended by the government).

For these types of property, you may be able to take a credit of 30 percent of your costs, including any labor, assembly or original installation. Fuel cell property is limited to $500 for each one-half kilowatt of capacity. Check out these solar energy savings calculators to see what kind of an impact this could make on your clients’ taxes:

  • Solar Estimate (for solar energy and wind turbines): Estimates the size and cost to install an energy system in your home. The financial analysis is based on expected utility bill savings and net system cost after tax credits and incentives.
  • Solar Insure: Estimates the cost of adding solar panels to a home.

Expired Green Tax Credits That May Be Extended

The last three items in the list expired at the end of 2016, but may be extended by the government and help save your clients money in the future.

Non-Business Energy Property Credit

If you make energy-efficient improvements to your home, you may be able to claim this credit up to $500 of the cost of materials and installation, assuming the credit is extended. Purchases and installations that allow you to claim this credit include exterior doors, windows, insulation, heat resistant roofs, heat pumps, central air conditioners, water heaters, stoves using biomass fuel, furnaces and advanced main circulating fans.

Vehicle Credits

Federal tax credits for electric and plug-in vehicles, if extended, will cover vehicles that were manufactured by a certified car maker, but not vehicles that have been converted to electrics or hybrids. These credits would be available if the vehicles are used for business or personal purposes. This credit does not cover golf carts and go karts.

  • The Alternative Motor Vehicle Credit may apply to a new vehicle with at least four wheels and is propelled by power derived from one or more cells that convert chemical energy directly into electricity by combining oxygen with hydrogen fuel.
  • The Qualified Plug-in Electric Drive Motor Vehicle Credit ($2,500 maximum) applies to the following:
    • A new vehicle with at least four wheels that 1) is propelled by an electric motor, 2) draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and 3) is capable of being recharged from an external source.
    • A new vehicle with two wheels that is 1) capable of achieving a speed of 45 miles per hour or greater, 2) propelled by an electric motor that draws electricity from a battery that has a capacity of not less than 2.5 kilowatt hours and 3) capable of being recharged from an external source.

Work with your clients to ensure they receive all the tax credits available to them; you’re helping save the environment while providing great service!

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