Tell your clients about new eco-friendly energy tax breaks

Several of our subscribers have asked us about the tax incentives for energy savings contained in the new economic stimulus law (the American Recovery and Reinvestment Act of 2009).
Strategy: Learn the new rules inside and out. Then spread the word to your clients. If they make energy-saving improvements this year, they can cut taxes in addition to utility bills. The new law changes may benefit both individual and business taxpayers.

What's new for individuals?

The new law triples the residential energy credit to 30% of qualified expenditures (up from 10%). Furthermore, the lifetime $500 cap is eliminated. It's been replaced by an overall limit of $1,500 for 2009 and 2010 combined. The changes are effective for energy-saving installations made after 2008 and before 2011.

The enhanced credit covers the following improvements in the home:

  • Insulation materials
  • Exterior windows (including skylights)
  • Exterior doors
  • Central air conditioners
  • Natural gas, propane and oil water heaters or furnaces
  • Hot water boilers
  • Electric heat pump water heaters
  • Certain metal roofs and stoves
  • Advanced main air circulating fans

The new law also removes the dollar caps for the separate 30% credit for expenditures on qualified solar hot water property, geothermal heat pumps and wind energy property. Caveat: A $500 cap per 0.5-kilowatt hour of capacity applies to qualified fuel cell property costs.

What's new for businesses?

A building owner can claim a tax deduction equal to $1.80 per square foot of new or existing commercial buildings that meet certain conditions.

Alternatively, partial deductions of up to 60 cents per square foot are available for eco-friendly improvements affecting the building envelope, lighting systems or heating and cooling systems.

The 2009 law includes numerous changes for businesses. For instance, it extends the credit for electricity produced from renewable sources through 2013 (2012 for wind facilities and eliminates the cap on wind property).
Advisory: For more details, visit Energy Star: Federal Tax Credits for Energy Efficiency.

Generate tax credits for plug-ins

Plug-in vehicles aren't on the mass market yet. But the 2009 stimulus law includes a tax break for this futuristic travel mode.
Alert: The new law establishes the base amount of the credit for plug-ins at $2,500. The full amount of the credit will be reduced when at least 200,000 units from all manufacturers have been sold in the United States.

Reprinted with permission from The Tax Strategist, June 2008. For continuing advice on this and numerous other tax strategies, go to www.TaxStrategist.net. Receive two FREE Bonus Reports and a 40% discount on The Tax Strategist when you use Promo Code WN0013.

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