Getting Green for Going Green

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Many individuals saved some money in 2009 by “going green” through environmentally-friendly decisions for their home, vehicle and even charitable contributions. Now these savings can be extended to the 2009 tax return, as taxpayers are finding they can save a significant amount of money by claiming special tax incentives.

The federal government is extending numerous tax credits for purchasing hybrids and making environmentally-friendly installations to new and existing homes.  What is even more substantial is tax credits come right off your taxes bottom line; unlike tax deductions, which are applied after your adjusted gross income is determined and, therefore, reduce taxes on a percentage basis, tax credits are applied to your adjusted gross income, reducing that income and, subsequently, the amount of tax you owe.

Going Green Tip #1 – Purchasing a Hybrid Vehicle

If you purchased a new fuel-efficient hybrid vehicle in 2009 you may be eligible for substantial tax savings. Hybrid vehicles include gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles, and have less emissions than ordinary vehicles.

Purchasers of these vehicles can receive substantial tax credits on their 2009 return using Form 8910. In addition, plug-in hybrid electric cars can earn tax credits ranging from $2,500 to $7,500 (using Form 8834), and plug-in electric motor vehicle owners can claim between $2,500 and $15,000 in credits (using Form 8936.)

The tax credit for a hybrid vehicle depends on the year and make of the vehicle.  For example, credits for 2009 model year hybrid vehicles are as follows:

Make, Model
Chrysler Aspen Hybrid
Dodge Durango Hybrid
Ford Escape Hybrid 2WD
Ford Escape Hybrid 4WD
Mazda Tribute Hybrid 2WD
Mazda Tribute Hybrid 4WD
Mercury Mariner Hybrid 2WD
Mercury Mariner Hybrid 4WD
Nissan Altima Hybrid
Credit Amount
$2,200
$2,200
$3,000
$1,950
$3,000
$1,950
$3,000
$1,950
$2,350

 

Tax credits can only be taken by the original owner of the vehicle and vehicles must have been purchased new. Also, the tax credits phase out once a manufacturer sells 60,000 hybrid vehicles and the tax credits are no longer available for fuel-efficient Lexus or Toyota Prius purchasers. Taxpayers can find the exact amount of credit available for hybrids on the IRS website by clicking here.

If your vehicle was converted to a qualified hybrid, fuel cell or advanced lean burn technology vehicle, you may be able to get a credit for a portion of the cost through an Alternative Motor Vehicle Credit on Form 8910. 

Going Green Tip #2 – Upgrading Your Home:

You may not have installed solar panels on your roof or a wind turbine in your backyard, but even smaller home improvements such as installing energy efficient windows, adding insulation or purchasing environmentally-friendly appliances can earn as much as $1,500 in tax credits on your 2009 tax return. Not only has the federal tax credit been raised from 10 to 30 percent, the maximum has been raised from $500 to $1,500, and some improvements such as wind energy systems, solar water heaters, and geothermal heat pumps are not subject to the maximum and save even more. 

For example, energy efficient replacement windows can earn up to $200 in tax credits, while energy efficient water heaters, furnaces, and biomass stoves earn up to $300, and adding insulation earns 10% of the cost up to $500 in tax credits. Larger improvements can lead to larger savings; installing solar panels give a 30% credit against the cost of equipment, and the former $2,000 cap has been removed. Solar water heating systems and geothermal heat pumps are eligible for tax credits up to $2,000 and wind turbines can earn a hefty maximum of $4,000 in tax credits.

Other improvements that can earn a tax break include skylights, main air circulating fans, storm windows, and storm doors. Residential energy credits can be taken using Form 5695, and in most cases, tax credits are offered against equipment costs, not installation costs. 

Going Green Tip #3 – Eco-Friendly Charitable Contributions:

Charitable contributions are another way to save a little green on your 2009 tax return, and giving to “green causes” is a great way to save. Giving monetary donations to eco-friendly charitable organizations such as conservation groups or organizations that promote eco-friendly products can help the environment and your bank account.

In addition, contributions made to Haiti victims in 2010 because of the environmental catastrophe can also be taken on your 2009 return. The contributions must have been made after January 11, 2010 and before March 1, 2010.

To qualify, charitable contributions must be made to eligible organizations, typically 501(c)(3) nonprofits, and must be listed as an itemized deduction using Form 1040, Schedule A.

Check Your State

Your state may also offer tax breaks for purchasing a hybrid or electric powered vehicle, or energy-efficient home improvements and upgrades, and the amount may vary depending on the particular state in which you live.

 

For more information please visit:

 

IRS