|
President Bush has signed into law new consumer tax credits for energy efficiency home improvements, as well as purchases of plug-in hybrid vehicles. These provisions were included in H.R. 1424, the Emergency Economic Stabilization Act of 2008, which the president signed on October 3, 2008. The homeowner tax credits are largely the same – but not identical – to those that expired at the end of 2007, and begin again on January 1, 2009. Taxpayers who claimed some but not all of the $500 federal income tax credit for energy efficiency home improvements that was in effect in tax years 2006 and 2007 may utilize the unused portion in 2009, the IRS has informed the Alliance to Save Energy. Please consult your tax advisor for details. What's New:
Energy Efficiency Can Lower Your Federal Tax Bill as Well as Your Energy Bills
1. Introduction to Tax CreditsUp to Contents A recent law expands and extends valuable federal tax credits for consumers who purchase fuel-efficient hybrid-electric or diesel vehicles and who make certain, specified energy-efficiency upgrades to their homes. Consumers who employ energy-efficient products in their homes or drive fuel-efficient vehicles enjoy multiple benefits. At home, these benefits include lower home energy bills, increased indoor comfort, and reduced air pollution. On the road, consumers will increase their gas mileage so they lower their gasoline costs, and they will dramatically reduce the amount of air pollution from their vehicles. In addition to helping savvy consumers lower their energy bills at home and on the road, the energy-efficient products eligible for the new federal tax credits actually lower the amount of federal income taxes that these taxpayers must pay Uncle Sam. What is a tax credit? You don’t receive an income tax credit when you buy the product, like an instant rebate. You claim the credit on your federal income tax form at the end of the year. The credit then increases the tax refund you receive or decreases the amount you have to pay. Tax credits vs. tax deductions: In general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions – such as those for home mortgages and charitable giving – lower your taxable income. If you are in the highest 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the value of a tax deduction. But a tax credit reduces your federal income tax by 100 percent of the amount of the credit. Please note: We at the Alliance to Save Energy are experts on energy efficiency, not taxes, and we do not provide tax advice; you may want to consult a tax professional. 2. Consumer Tax Credit InformationUp to Contents Details on the tax credits for hybrid vehicles and for home improvements are located in Section 3 and Section 4 of this document. In addition, there is a consumer tax credit for solar energy and fuel cells (see Section 5). The tax credits took effect in January 2006. The credit for home improvements expired in December 2007 but now is reinstated for all of 2009. The hybrid vehicle tax credit phases out at a different time for each manufacturer. Here is how much you could save on your taxes if you took advantage of some of these tax credits. But remember that your energy savings each year may be greater than the one-time tax savings: Selected Tax Credits
* Maximum of $500 total for home improvements.
In some areas of the country, consumers also will be eligible for utility or state rebates or state tax incentives for the same homes, vehicles, and equipment. See the DSIRE database of state incentives for more information on state and utility incentives, or contact your state energy office or local utility for more information. Tax Credits Available to Businesses Businesses (and, indirectly, governments and nonprofit groups) also can get the tax credit for purchasing hybrid or diesel vehicles. And a tax deduction for efficient commercial buildings is available to businesses as well. Businesses that sell certain other energy-efficient consumer products (see below) also are eligible for federal income tax credits. While these credits do not go directly to consumers, they could reduce the cost to consumers of:
Note: Additional tax credit information (for businesses, builders, consumers and more) is available at the Tax Incentives Assistance Project (TIAP) Web site, including the latest information from IRS on the home energy efficiency tax credits. 3. Hybrid and Diesel Vehicle Tax CreditYou can get an income tax credit of $250-$3,400 for buying or leasing a new hybrid gas-electric or diesel automobile. When it comes time to replace your old, fuel-inefficient vehicle for a new efficient hybrid or low-emissions vehicle, please consider converting your old vehicle into a tax-deductible donation to the Alliance. Through our vehicle recycle service, we ensure that your old, fuel-inefficient vehicle will be permanently and responsibly taken off the roads through proper scrapping and recycling. Who gets it? Individuals and businesses that buy a new hybrid or diesel car or truck. If a tax-exempt organization buys such a vehicle, the retailer may take the credit. For leased vehicles, the lesser may claim the credit. What vehicles qualify? Hybrid vehicles that use less gasoline than the average vehicle of similar weight and that meet an emissions standard. “Lean-burn” diesel vehicles also qualify, but only a few diesel vehicles meet the emissions standard (see below). There is a similar credit for plug-in hybrid or pure electric vehicles (which you can power by plugging them into a wall socket), alternative-fuel vehicles and fuel-cell vehicles, but these are not widely available. The vehicle must be in the United States. How much is the credit? The tax credit amount could range from $250 to $3,400 depending on the fuel economy and the weight. If you buy more than one eligible vehicle, you can get a tax credit for each vehicle. So far the following hybrid vehicles and credit amounts have been officially certified:
Information Source: IRS. Updated October 6, 2008. The list of eligible vehicles is available at http://www.fueleconomy.gov/feg/tax_hybrid.shtml You can check for updates on eligible vehicles at the IRS website. The actual formula for calculating the credits is available below, in Section 6.1 of this document. Manufacturers should certify to buyers of a qualifying vehicle the amount of the credit for that vehicle. Also, companies that buy heavy-duty hybrid trucks can get a larger tax credit. The credit cannot be taken against the Alternative Minimum Tax (AMT). When is it available? The tax credit is for vehicles “placed in service” after December 31, 2006 and purchased on or before December 31, 2010. The vehicle tax credit is phased out for each manufacturer once that company has sold 60,000 eligible vehicles. At that point, the tax credit for that company’s vehicles will be gradually reduced over the course of another year. The phase-out schedule is available in Section 6.2 of this document. What do I need to do to get the vehicle tax credit? You will need to file IRS Form 8910 with your taxes. In addition, you will need the certification from the manufacturer and need to keep at least receipts proving that you purchased an eligible vehicle. Taxpayer qualification requirements are available from the IRS web site. Accountants and tax advisors should also be able to provide more guidance. Very detailed information on the tax credit is available in the IRS partial interim guidance for hybrid vehicle tax credit . Wasn't there a tax incentive for hybrid vehicles purchased in 2005? Yes, there was a $2,000 tax deduction for hybrid vehicles through the end of 2005. This was generally worth less than the new tax credit. Are there any other tax incentives available?Some state and local governments also provide incentives for hybrids. To see if you are eligible for a state or local government tax credit, you can view the U.S. Department of Energy's list of State & Federal Incentives & Laws or the DSIRE database of state incentives. Is there a credit for diesel or natural gas vehicles? Diesel vehicles also are eligible for the tax credit, and a few 2009 models have now been certified.
Alternative Fuel Vehicles (AFV’s) are eligible for a federal income tax credit of up to $4,000. To be eligible for this tax credit, the vehicle must only be capable of operating on any of the following alternative fuels: compressed natural gas (CNG), liquefied natural gas (LNG), liquefied petroleum gas (LPG), hydrogen, and any liquid at least 85% methanol by volume. The only car AFV certified so far is the:
4. Home Energy-Efficiency ImprovementUp to Contents Taxpayers who claimed some but not all of the $500 federal income tax credit for energy efficiency home improvements that was in effect in tax years 2006 and 2007 may utilize the unused portion in 2009, the IRS has informed the Alliance to Save Energy. Please consult your tax advisor for details. You can get a one-time income tax credit of up to $500 in total for installing efficient new windows, insulation, doors, roofs, and heating and cooling equipment in your home. Who gets it? Individuals who install specific energy-efficient home improvements. What energy-efficient home improvements are eligible? The overall $500 cap can be reached in several ways with the purchase and installation of energy-efficient products:
Section 6.4 of this document contains the detailed criteria for heating and cooling equipment. In addition, to be eligible for the federal tax credits:
In addition, windows, doors, insulation, and roofs must be expected to last at least five years (a two-year warranty is sufficient to demonstrate this). Manufacturers can certify (in packaging or on the company’s web site) which of their products qualify for the tax credit. Retailers, contractors, and manufacturers should be able to help you determine what levels of insulation and what other products qualify. All the improvements must be installed in or on the taxpayer’s principal residence in the United States. Condo and co-op improvements are apportioned to the owners. The credit cannot be taken against the Alternative Minimum Tax (AMT). When are they available? The home improvement tax credits apply for improvements “placed in service” from January 1, 2009, through December 31, 2009. They are not available in 2008, but mostly were available in 2006 and 2007. The IRS defines “placed in service” as when the products or materials are ready and available for use – this would generally refer to the installation, not the purchase. What do I need to do to get the tax credit? You will need to file IRS Form 5695 with your taxes. In addition, you will need to keep at least receipts proving that you purchased the improvements and a copy of the manufacturer’s certification (or the ENERGY STAR label for windows). Accountants and tax advisors should also be able to provide more guidance. 5. Geothermal Heat Pumps, Solar Energy, and Fuel CellsUp to Contents There are also tax credits for geothermal heat pumps solar photovoltaic cells, solar water heaters, and fuel cells. Geothermal (or ground-source) heat pumps are eligible for a tax credit for 30 percent of the cost up to a maximum credit of $2,000. The heat pump must be “placed in service” between January 1, 2008 and December 31, 2016. Only Energy Star geothermal heat pumps are eligible. More information on the solar tax credit is available from the Solar Energy Industries Association. Fuel cells for homes are not yet commercially available. 6. ADDITIONAL INFORMATION6.1 Tax credit lawsUp Page to "Hybrid Electric Tax Credit" or to "Contents" The tax credits were first enacted in the Energy Policy Act of 2005 (P.L. 109-58), signed on August 8, 2005. The home improvement credit was extended, and other credits were added in the Energy Improvement and Extension Act of 2008, attached to the Emergency Economic Stabilization Act of 2008 (P.L. 110-343), signed on October 3, 2008. The home improvements credit (formally called the “nonbusiness energy property” credit is in section 25Cof the tax code. The hybrid vehicle credit is part of the “alternative motor vehicle” credit in section 30B of the tax code. The new ground source heat pump credit, along with the credits for solar equipment and fuel cells, are called the “residential energy efficient property” credit and are in section 25D of the tax code 6.2. Hybrid vehicle tax credit amountUp Page to "Hybrid Electric Tax Credit" or to "Contents" Auto manufacturers calculate the tax credit for qualifying hybrid and diesel models and submit certifications on qualifying models, including the credit amount, to the IRS. The American Council for an Energy-Efficient Economy (ACEEE) makes preliminary estimates of the credit amount for upcoming vehicles as well. If you really want to know how the credit is calculated, read on – it’s complicated. For cars and light trucks (SUV's, minivans, and pickup trucks up to 8,500 pounds) the tax credit is the sum of a “fuel economy credit” and a “conservation credit,” both of which depend on the vehicle’s fuel economy compared to the baseline “2002 model year city fuel economy” of a vehicle in the same weight class. The fuel economy credit depends on the improvement of the fuel economy over the baseline. The credit is as follows, based on the vehicle fuel economy as a percentage of the baseline fuel economy:
The conservation credit depends on the estimated lifetime fuel savings, expressed in gallons of gasoline. The credit is:
Fuel savings are calculated as (120,000 miles divided by baseline mpg) minus (120,000 miles divided by vehicle mpg). 6.3. Phase-out of the hybrid tax creditUp Page to "Hybrid Electric Tax Credit" or to "Contents" Once a manufacturer has sold 60,000 hybrid and/or diesel vehicles that qualify for the tax credit, the credit amount for vehicles made by that company is phased out according to the following schedule:
As of October 1, 2007 purchasers of Toyota or Lexus hybrid vehicles are no longer eligible for any tax credit, as a result of Toyota having sold 60,000 qualified hybrid cars and SUV’s as of October 1, 2006. Tax credits for Honda hybrids are now in the process of being phased out. Currently, buyers of Honda hybrid vehicles are eligible for a 25% tax credit until December 31, 2008, after which the tax credit will no longer be available. The hybrid and diesel tax credits expire for all cars and light trucks on December 31, 2010, whether or not the manufacturer has sold 60,000 vehicles or reached the end of the phase-out period. Auto manufacturers must report their sales to the IRS quarterly and should change the certification they provide to buyers as the amount of the credit diminishes.6.4. 2005 tax deduction for hybrid vehiclesUp Page to "Hybrid Electric Tax Credit" or to "Contents" The new tax credit for hybrid vehicles is available only for vehicles placed in service starting January 1, 2006, but buyers who purchased hybrids before that date are eligible for an older tax deduction. Individuals and businesses that bought new hybrid vehicles in 2005 can claim a tax deduction of $2,000. For tax year 2005, that deduction applies to these models: Toyota Prius, Toyota Highlander Hybrid, Honda Insight, Honda Civic Hybrid, Honda Accord Hybrid, Ford Escape Hybrid, or Lexus RX 400h. 6.5. Criteria for heating and cooling equipmentUp Page to "Home Improvement" or to "Contents" In order to be eligible for the tax credit, heating and cooling equipment must meet specified measures of energy efficiency:
#### |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
 |
 |
 |
|
||||||||
|
|||||||||