The IRS filing deadline may be looming, but there’s still enough time to cash in on green tax breaks. Ask your accountant for help, or consult the Database of State Initiatives for Renewables and Efficiency (DSIRE), which provides comprehensive information on environmentally sustainable local, state, federal, and utility-based incentives and policies. Here we highlight a handful of federal initiatives that could help you green your wallet this tax season.
Renewable remodeling: Homeowners who have installed renewable energy heating and cooling systems, including geothermal heat pumps, small wind turbines, and/or solar energy systems, can claim 30 percent of the cost of a new renewable energy system, with no maximum limit. An added bonus: the Residential Energy Efficient Property Credit, which runs through 2016, applies to any home you own, not just your primary residence.
Other eco-friendly home improvements, including adding insulation and installing energy-efficient exterior windows, could qualify for the Residential Energy Property Credit , which also lasts until the end of 2016. Applying only to primary residences, the credit is worth 30 percent of the cost of all eligible modifications. Taxpayers can pocket a maximum tax credit of $1,500 for improvements placed in service in 2009 and 2010.
Electric vehicles: Going electric could also lower your taxes. The Plug-in Electric Drive Vehicle Credit, which stays intact through 2014, offers drivers of qualified electric vehicles $2,500 to $7,500 in credit, depending on the battery capacity. Search your vehicle by make, model, and year to check whether it qualifies at the U.S. Department of Energy’s Fuel Economy website.
Meanwhile, the Plug-in Electric Vehicle Credit offers a tax credit worth 10 percent of the cost of certain low-speed electric vehicles and two- or three-wheeled vehicles purchased after February 17, 2009 and before January 1, 2012. Taxpayers can claim up to $2,500.
Commuter tax benefits: Of course, driving an electric vehicle isn’t the only way to travel green. The fiscal cliff deal has raised the public transit commuter benefit for eligible employees whose companies participate in a benefit program from $125 to $240 a month, the same amount as the monthly pre-tax parking benefit. Two years ago, as part of the transit parity provision, employees could reserve up to $230 a month pretax salary for both transit costs and parking. But after the provision expired at the end of 2011, the parking limit rose to $240 a month, while the transit limit fell to $125 a month.
Taxpayer savings resulting from restoring the transit parity provision are significant. Imagine that you’re in the 40 percent combined federal and state tax bracket. Setting aside $240 a month instead of $125 a month in pre-tax transit benefits translates to $552 saved per year.
Charitable donations: Most taxpayers already know that they can get a deduction from donating old clothes and furniture to their local thrift shop. But did you know that some e-waste recycling programs also count as tax-exempt organizations? Our increasing reliance on laptops, cell phones, and other electronics has resulted in a major e-waste problem. According to the U.S. Environmental Protection Agency, the U.S. alone generated 2.37 million tons of e-waste in 2009, only about 25 percent of which was collected for recycling.
Search the IRS’s exempt organizations database to check whether your local e-waste recycling facility qualifies as a 501(c)(3) organization, which would make your e-waste donations to them tax-deductible. Do your research to make sure that your old electronics go to an organization that will recycle them responsibly. Better yet, donate your items to an organization that will put them into reuse.
When making any donation, remember to save your receipts so that you claim the correct amount on the Schedule A (Form 1040) for itemized deductions. Taxpayers whose total charitable deductions fall below $500 don’t need to submit an additional form. Those whose deductions exceed this amount must complete Form 8283 with their return. To learn more, read the IRS’ Guide to Charitable Contributions.