Depending on if it’s your second home or your principal residence — “going green” at home can reduce both your tax and energy bill, all while helping the environment. The trick to achieving all three benefits is that you need to buy and install specific kinds of renewable energy equipment in the home.
Save your green by investing in green
During 2018 and 2019, you might qualify for a 30% of expenditures tax credit (which includes costs for site preparation, assembly, installation, piping, and wiring) for installing the following kinds of renewable energy equipment:
- Qualified solar electricity generating equipment and solar water heating equipment,
- Qualified wind energy equipment,
- Qualified geothermal heat pump equipment, and
- Qualified fuel cell electricity generating equipment (limited to $500 for each half kilowatt of fuel cell capacity).
The credits can be substantial because these items can be expensive. To be eligible, install the equipment at your U.S. residence, including a vacation home — except for fuel cell equipment, install this at your primary home. You can’t claim credits for equipment installed at a property that’s used only as a rental.
At least half of the energy used to heat water for the property must be created by the solar equipment to be eligible for the credit for solar water heating equipment. Unless your solar water heating equipment is certified for performance by the nonprofit Solar Rating & Certification Corporation or an equivalent entity sanctioned by the state you are located, no credit is permissible. (Keep this certification with your tax records.)
The credit rate for these expenditures is scheduled to drop to 26% in 2020 and down to 22% in 2021; after that, the credits are expected to expire.
Document and explore
Just like all tax breaks, documentation is essential when claiming credits for green investments in your home. Record how much you spend on qualifying equipment, including any extra amounts for groundwork, installation, and assembly. Also, retain a record of when you complete the installation because you can claim the credit only for the year when that occurs.
Make sure to look past the federal tax credits and discover other ways to save by going green. Your green home investments may also be qualified for state and local tax benefits, sponsored state and local financing deals, and utility company refunds.
Contact us to learn more about federal, state and local tax breaks offered for green home investments.
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Ben R Shull CPA LLC provides clients with tax, transaction, and advisory services. The insights and quality services we deliver help lead our clients through the next generation of changes, and accelerate growth while reducing risk. CPA Katy, TX.