Have you thought of investing into “going green” initiatives? It is not only helpful in creating a sustainable earth but can potentially reduce your tax and energy bill. The catch to reap all the tax credit benefits is understanding and verifying they fall under specified requirements.
Investing and Saving
If you make investments into your home in 2018 or 2019, you could be eligible for a tax credit of 30% of expenditures. This applies to the installation of 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).
(The tax credit applies to the spending on site preparation, assembly, installation, piping, and wiring for the above.)
Due to this type of work being expensive, the credits you could be eligible for can be quite significant. To qualify, the equipment must be installed at your U.S. residence, including a vacation home — except for fuel cell equipment, which must be installed at your principal residence. You can’t claim credits for equipment installed at a property that’s used exclusively as a rental.
Qualifying for Solar Tax Credits
To qualify for the credit for solar water heating equipment:
- At least 50% of the energy used to heat water for the property must be generated by the solar equipment.
- Solar water heating equipment must be certified for performance by the nonprofit Solar Rating & Certification Corporation or a comparable entity endorsed by the state in which your residence is located. (It is important that you keep this certification for your tax records.)
The credit rate will not stay at 30% for long as they are scheduled to drop to 26% in 2020 and then to 22% in 2021. Shortly after, the credits are scheduled to expire.
Document and explore
As with all tax breaks, 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 that occurs.
Be sure to look beyond the federal tax credits and explore other ways to save by going green. Your green home investments might also be eligible for state and local tax benefits, subsidized state and local financing deals, and utility company rebates.
Have you made or are you thinking of making any environmentally- friendly changes to your home this year? Talk to us to learn more about federal, state and local tax breaks available for green home investments.