Looking to save money on fuel and electricity bills while productively contributing to a greener economy? You will be pleased to learn that there are generous tax credits available to anyone who is looking to invest in solar energy equipment and/or electric vehicles.
Solar Energy Equipment Tax Credit Provisions
So, what exactly qualifies for such a credit and how much? Individuals can receive a credit equivalent to 30 percent of total expenditures to purchase and install “solar electricity generating equipment” or “solar water heating equipment” for a residence that includes both personal and vacation homes. If the residence is used solely as a rental property, it does not qualify for the credit. The solar water heating equipment must generate a minimum of 50 percent of the total energy used to heat water on the property & equipment used to heat a pool or hot tub does not qualify. Lastly, the water heating equipment must be certified by the nonprofit Solar Rating Certification Corporation or other similar state endorsed entity.
The credit is limited to home expenditures ranging from a house, mobile home, manufactured home, condo, or house boat. All must conform to federal safety standards.
Best Practices for Solar Energy Tax Credits:
- Keep accurate and verifiable records on all expenditures (including site preparation, assembly, and installation) for the period in which the installation is completed – this is when the credit is taken on your 1040 on form 5695 Residential Energy Credits.
- The credit has been extended through December 31st of December 2019 and bears no upper income limit. The total credit will drop to 26 percent in 2020, and 22 percent in 2021, and is scheduled to expire after 2021.
- There may be additional state and local incentives available in addition to the credit including utility company rebates and special state and local financing.
These credits apply only to residential energy property. There are other credits available for energy property used in a business as well which have not been covered in this article.
Electric Vehicle Tax Credit Guidelines
If you are looking to save on fuel prices and opt for a new plug-in electric vehicle, you may also be eligible for a tax credit up to $7,500. The credit is limited to new purchases versus used and does not apply to leased vehicles.
Qualifications for the Tax Credit:
- The vehicle must draw power from a battery with a minimum capacity of four kilowatt hours and utilize an external charging source.
- The vehicle must have four wheels and be used primarily on public roadways.
- Primary use must be in the U.S. and the vehicle must meet federal emission and clean air standards.
- The vehicle can be a hybrid that utilizes electric and gas for fully electric.
Some things to keep in mind when considering purchasing a plug-in electric vehicle and opting for the tax credit;
- While the maximum credit is $7,500, there are some limitations and some makes/models that qualify for less.
- You may also be eligible for state tax credits, rebates, and even reduced registration and taxes at purchase.
If you are in the market for any of the discussed green alternatives and want to learn more about how you can benefit from tax savings, contact your trusted advisor at Apple Growth Partners to help you through the process.