Go green at home and help save the environment, energy, and money
Going green at home is good for the environment and it can help you save on your energy bills. But did you know you can also reduce your tax bill? But to reap all three benefits, you need to buy and install certain types of renewable energy equipment in your home.
The benefit of investing in green
You may be eligible for a tax credit of 30 percent of expenditures in 2018 and 2019 (including costs for site preparation, assembly, installation, piping, and wiring) for installing the following types of renewable energy equipment:
- Qualified solar electricity generating equipment and solar water heating equipment,
- qualified wind energy equipment,
- qualified geothermal heat pump equipment, and
- qualified fuel cell electricity generating equipment (limited to $500 for each half kilowatt of fuel cell capacity).
These items are expensive so the credits can be substantial. To qualify, the equipment must be installed at your U.S. residence and/or your vacation home. But you can’t claim credits if your vacation home is used exclusively as a rental property. The only exception is fuel cell equipment, which must be installed at your principal residence.
To qualify for the credit for solar water heating equipment, at least 50 percent of the energy used to heat water for the property must be generated by the solar equipment. And no credit is allowed for solar water heating equipment unless it’s certified for performance by the nonprofit Solar Rating & Certification Corporation or a comparable entity endorsed by the state in which your residence is located. (Keep this certification with your tax records.)
The credit rate for these expenditures is scheduled to drop to 26 percent in 2020 and then to 22 percent in 2021. So to get the greatest tax benefits complete your green installations before 2020 to reap the greatest tax credits.
Document and explore
As with all tax breaks, it’s all in the paperwork. Documentation is key when claiming credits for green investments in your home. Keep proof of how much you spend on qualifying equipment, including any extra amounts for site preparation, assembly and installation. Also keep a record of when the installation is completed, because you can claim the credit only for the year when it’s installed.
Be sure to look beyond the federal tax credits for tax savings when going green. Your green home expenditures may also qualify for state and local tax benefits as well as subsidized state and local financing deals, and utility company rebates.
To learn more about federal, state and local tax breaks available for green home investments, contact Eden LaLonde, CPA, MAcc, Ciuni & Panichi, Inc. Tax Department Senior Accountant, at 216-831-7171 or by email here.
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