I’ve heard that I can get tax credits for installing solar panels. What other tax advantages can I gain from green actions?
-James D., Fort Worth, TX
Wade around in federal tax code long enough and you’ll stumble on a surprising number of credits and deductions that can make green choices financially attractive. You heard right about a tax credit for installing solar panels. The Residential Renewable Energy Tax Credit is a personal tax credit that rebates 30 percent of the expenses resulting from the purchase and installation of a renewable system. “Renewable energy system” includes solar and wind systems, and geothermal heat pumps. The credit expires at the end of 2016.
The Residential Energy Efficiency Tax Credit is another energy-related credit, one where 2013 is the last year you can claim it! Individuals can receive an up to $500 credit for certain home improvements that improve energy efficiency. Improvements include approved insulation materials, windows, fans, water heaters, air conditioners, and heat pumps.
Depending on the make and model, you can receive a credit for your electric or hybrid car thanks to the Plug-In Electric Drive Vehicle Credit. Among more than a dozen models, the 2014 Accord Plug-In Hybrid has a $3,626 credit; 2011 to 2014 Chevrolet Volts have a $7,500 credit; and 2012 to 2014 Toyota Prius plug-ins have a $2,500 credit.
These are just a few federal tax benefits. Many states have their own benefits, too. The state of Texas offers a sales tax holiday on certain ENERGY STAR–rated products (this year’s holiday is Memorial Day weekend). Ask a local tax preparer for additional state-specific credits and deductions.