Celebrate Earth Day by exploring environmental tax breaks
Monday, April 22, 2013
Happy Earth Day!
This event was created 43 years ago in large part as a response to the 1969 oil spill in Santa Barbara, Calif. The idea was to designate a day on which the American public could focus on air and water pollution and how to mitigate or prevent their damage to our environment.
It has grown into a global movement.
Heck, even the Internal Revenue Service and tax collectors at other governmental levels are involved, thanks to the many laws that offer tax breaks for environmental actions.
Here are some environmentally-related tax savings to think about today and as your work on your taxes or make moves this year that could affect a future tax bill.
Improve your home: The Energy Policy Act of 2005 created tax credits for homeowners who made certain energy efficient improvements to their residences. The original tax breaks have changed over the years, including a generous expansion and extension in the 2009 stimulus act and a reversion to smaller tax credits in 2011.
The good news, though, is that this tax break is still around. And some folks might be able to get a tax credit -- which is a dollar-for-dollar reduction of your tax bill -- of up to $500 for making changes to their homes. The common upgrades include installation of energy-efficient windows, insulation, doors, roofs and heating and cooling equipment and are available through the 2013 tax year.
If you want to go beyond basic, relatively cheap, home energy upgrades, you can get a bigger tax break. Purchase and installation of solar electric systems, solar hot water heaters, geothermal heat pumps and wind turbines will get you a tax credit of up to 30 percent of your costs with no limit on the amount.
Don't have the bucks to make such energy upgrades now? You've got time. The tax credit for these more extensive and expensive home energy upgrades are available as long as the systems are in place by the end of 2016.Details on the home energy efficiency tax credits can be found at the Energy Star Web page.
Drive home tax breaks: A few years ago when gas prices were holding near the $4 per gallon mark, hybrid vehicles were all the rage.
As a bonus, many purchasers of these energy efficient autos got a tax credit. Unfortunately, the hybrid tax credit is no longer available.
But if you decide to go for an electric car, or as they are known in tax-speak a plug-in electric drive vehicle, Uncle Sam might help out.
The tax credits, depending on your vehicle's specifications, range from $2,500 to a maximum of $7,500. The IRS maintains a page with the available vehicle tax credits by manufacturer.
To get the credit, you must buy a new electric vehicle, not lease it. And the qualified credit will phase out based on how many of the vehicles a manufacturer sells.
Wait! You don't have to rush to your electric car dealership. The phase out doesn't start until a car maker sells at least 200,000 qualifying vehicles in the United States. And that's not going to happen for quite a while.
Examine eco investments: If your idea of green is making more money, you can do that in an environmentally conscious way.You can buy individual shares of or mutual funds that include "green" companies. These are businesses with an environmental focus, such as conservation programs or organic food manufacturers or retailers.
Even corporations that are not directly involved in ecological activities also might be worthwhile environmental investments. Many companies in recent years have taken steps to make their operations more Earth friendly, such as converting offices to solar power or converting open space on their corporate campuses to open space to create a wilderness oasis.
As with all investments, do your homework and find an eco-friendly fund that meshes with your personal philosophies and financial goals.
And the tax angle? If you sell an asset that you hold for more than a year, regardless of its environmental actions, then you'll pay lower capital gains tax rates -- 15 percent for most of us; 20 percent for higher earners; zero for folks in the 10 percent and 15 percent tax brackets -- on the profit.
Give to environmental groups: If your favorite environmental organization is on the IRS list of registered nonprofits (you can check via the agency's online search tool), then your donation to the group can be deducted on your tax return if you itemize.
Some states also allow you to make donations to charities, including many with an environmental focus, directly on your state income tax return via check-off boxes. Check with your state tax department about these programs.
Check out state tax breaks: In addition to finding out about checkoff programs on your state tax return, you should check out other more local environmental tax breaks.
The Database of State Incentives for Renewables and Efficiency (DSIRE) is a free, comprehensive online source of information on state, local, utility and federal incentives that promote renewable energy and energy efficiency.
And since Earth Day is global, Canadians should check out the Office of Energy Efficiency at Natural Resources Canada, which keeps an online inventory of programs that promote the efficient use or conservation of energy and the use of alternative energy. The list covers national programs, as well as those offered by provincial and territorial governments, major Canadian municipalities and major electric and gas utilities and companies.
Earth Day fun: While Earth Day is educational, it should be fun, too, as we celebrate our planet and ways to make it better for ourselves and future generations. So here are a couple of Earth Day diversions.
Regardless of what you think about Google as a corporate entity and its pervasiveness in our lives, you've got to appreciate the talent of folks who come with its special home page images and illustrations, known as doodles.
For Earth Day 2013 the search engine home page has posted an interactive doodle where you can experience, in animated form, much of what nature has to offer. You can change the seasons, weather, moon and more.
So that you don't miss anything, Google has created a checklist for today's Earth Day doodle.
You also can check out just what you know about the third rock from the sun with Space.com's Earth quiz.
Click on the image above to go to the website where you can take the quiz.
You also might find these items of interest:
You can follow this conversation by subscribing to the comment feed for this post.