By now, we all know how important it is to be more energy efficient. But did you know that you can actually get a tax break from making greener choices? It’s true! The U.S. government has been offering citizens incentives to save energy in their homes, and these, combined with energy efficient practices, can add up to big savings over the long run. Here’s what you need to know about energy efficient tax credits.
What are they?
Energy tax credits are essentially the federal government’s way of saying “thank you” for doing your part in conserving energy. These credits are given to taxpayers who purchase qualifying energy efficient appliances or make changes to their homes or businesses to improve energy efficiency.
What equipment or upgrades qualify?
Most appliances or equipment that features an “Energy Star” label qualifies for the tax credit; however, there are a few that do not. Air conditioners, furnaces, refrigerators, and other major household appliances may be eligible, along with solar panels, solar-powered water heaters, wind turbines, geothermal heat pumps, and some fuel cells. You can also make energy efficient upgrades to your home that may qualify for a tax credit, depending on the material that’s used. This may include installing a new roof, exterior doors and windows, and insulation
How do they work?
The tax credits work by allowing you to deduct, dollar for dollar on your taxes due, a certain percentage of your purchase of energy efficient appliances and upgrades on your federal tax return. For example, if the credit covers 30% of your purchase and you bought an qualifying furnace for $3,000, you can deduct $900 (30% of $3,000) from your taxes due. That’s a significant amount saved, and that doesn’t even include the cost savings you’ll experience over the life of the appliance.
Tax credits are a great reason to buy energy efficient appliances or make energy-saving upgrades to your home. It’s true that these appliances and upgrades will often cost more upfront, but between the tax credits and usage savings, you’ll save money over the long run.