Now more than ever the focus on “going green” in order to help the environment has pushed everyone to find alternate and better ways of being energy efficient and nature-friendly. What people may not have known is that going green pays off in more ways than one. Not only can you help the environment by trading up for a hybrid car or find more ways to reduce, reuse, and recycle, but you can save yourself some green as well. Tax breaks and adjustments have come into play over the past few years that give a little incentive to those who do what they can to help keep our planet clean.
Many of these tax breaks were introduced in the Energy Policy Act of 2005. Something small such as turning down your thermostat can help you save a bit of cash, but larger items that are more likely to pop up on your taxes are what the breaks focus on. Investing in things such as insulated windows, hybrid cars, pigmented metal roofs, and installing alternate energy systems such as solar water heating systems. If you think something may be included, be sure to take note of it so you can double check later, and you can always ask a professional tax prepare about these items for more information.
What you will get is not a tax deduction, but a tax credit. There is a large difference. A tax deduction is an amount that is subtracted from your total taxable income. A tax credit reduces the amount of tax you pay as a whole. So what will you need in order to get this tax credit? First, be sure to save all the information for items that are included for the credit. Next you will need Form 5695 – Residential Energy Credits in order to fill out all the necessary information. You can get a tax credit of up to $500 when it comes to your home’s shell (insulation, windows, et.c) and a tax credit of up to $2,000 for alternative energy systems you may have installed. The purchase of a fuel-efficient vehicle can earn you a tax credit of up to $3,400; the amount you get will depend upon the fuel-economy of the automobile you bought. There is no regulation on the type of vehicle you buy; it could be an SUV, but as long as it qualifies as fuel-efficient, it can be included.
Before filling out the form, always be sure to read the instructions to make sure you truly do qualify for an energy efficiency tax credit. There are different rules regarding single person homes, businesses, spouses living in different homes, joint occupancy, and so forth.
Even if you missed out during tax season this year, you can start planning ahead for next year. Switching to energy efficient products will help you save money during the year and then when the next tax season comes around, it can help you get more back in return. Planet Earth thanks you too.
