As a green builder, we created our business around the idea that it’s never too early to think about the future. It’s practically in our genetic makeup, and everyday, we educate home- and business owners how they can make smart, environmentally conscious decisions within the very buildings we spend so much time in, all for the sake of that ever-hopeful future of ours. What many do not know is that these decisions can also be one that comes with amazing financial incentives. That’s why if you want your future to include tax credits for sustainable solar energy solutions and more, you may want to think fast and act now! Here’s what you need to know if you want to make your next trip to your accountant a welcome one.
About ten years ago, the Environmental Protection Agency and the Department of Energy helped establish the Energy Policy Act of 2005, which offered a Federal Investment Tax Credit of 30 percent for homeowners and businesses purchasing and utilizing solar-electric systems, solar water heating systems and even fuel cells. This particular tax credit through other political initiatives eventually expanded out to include non-solar energy alternatives such as geothermal heat pumps and small wind-energy systems.
A tax credit of this size essentially takes that 30 percent of the total system’s cost and applies it to the taxes you owe for that year. Lucky for us, a good number of these renewable solutions do not have a no maximum cap to the amount we can claim, which means you won’t risk being at a loss for installing a renewable energy system. All those labor costs for prep-work, assembly and install would be covered under the total cost of the system. In terms of numbers, if the system cost $15,000, you could expect a credit of $4,500 on taxes you owe for the year it was installed. And if your tax credit exceeds what you owe for that year, it can be carried over to the next year up until 2016… Not a bad deal!
This tax credit isn’t even solely held to your primary residence; you can even claim it for a vacation home. The only difference is that the amount of the credit that you can utilize is dependent on the time that you are actually in that home. Rental properties, on the other hand, generally do not qualify as the owner does not usually live there. So what’s the rush then?
Nothing lasts forever and so is true of this tax credit. When the powers that be extended the tax credit in 2008, they only did so for an additional eight years, bringing its expiration date to 2016. That leaves only three years to know with any certainty that you can take advantage of this tax credit. After that we just cannot say what the future holds, but for now, if you want to see an impact on your tax liability for 2014, you need to get moving! Any of the aforementioned renewable energy systems must be installed before the New Year. This means you need to have the contract for the work signed by mid-November with all the necessary permits in place to make sure all install work will be completed in time before the first of January. Hurry, the end of the year is coming. Don’t miss out on some major savings this tax season. Forward-thinking green solutions are our future.