5: Includes Labor and Installation
There's another benefit to taking a credit on your energy efficiency upgrades. We're used to taking deductions or credits for the tangible items we buy. Say we are writing off a copier because we use it solely for work: We only deduct the cost of the machine. We can't deduct the cost of the labor and installation it takes to install it. (Listen, I don't know your copier situation. Wouldn't a professional have to install a real nice one?)
But with residential energy efficiency deductions? You don't just write off the cost of the system itself; you can also include the cost of labor and installation. Even hiring someone to wire or pipe the equipment to your home is part of the costs associated with the installation. (Just remember that the fuel cell credit might not be that whole 30 percent write-off if the kilowatt capacity is the smaller expense.)
4: Plug-in Vehicle Credits
It used to be that hybrid gas-electric vehicles earned you a tidy tax credit, but the credit soon expired after 60,000 qualifying cars were sold (the designated phase-out limit of the credit) [source: Motavalli]. But if you do buy a plug-in or all-electric vehicle, you're in the running for a huge credit.
Depending on your battery capacity, you can claim up to $7,500 for a tax credit if you've purchased a "qualified plug-in electric drive motor vehicle" (also known as an electric car). You can start with a $2,500 credit, but you can receive $417 in additional credit if your vehicle draws from a battery of at least 5 kilowatt-hours of capacity -- plus an additional $417 for each kilowatt-hour in excess of the five [source: IRS Plug-In]. Not sure if yours qualifies? Look at this handy chart the IRS has compiled for you to reference.
3: State Credits
Like we said, several federal tax breaks have ended in the past few years. (One big one, the Nonbusiness Energy Property Credit, gave credits for energy-efficient windows, stoves and insulation, among other updates. It could only be claimed through 2013.) But if you're trying to save energy and go a little greener, you still might have some luck if your state offers tax rebate or credit programs.
Luckily, there are some really easy ways to do this. In fact, there's a whole government website devoted to helping you find breaks for your residence or business. With the Database of State Incentives for Renewables and Efficiency (DSIRE), you can simply look up your state to learn about any incentives available to you [source: DSIRE]. The Department of Energy also offers an easy look-up feature that allows you to search by type of system and eligibility status [source: DOE].
2: Charitable Electronics Recycling
Here's one tip that's a pretty clever way to find yourself some energy-efficient tax breaks on your return. And -- give yourself a pat on the back -- it's also going to help the environment and possibly someone in need.
You probably know that if you itemize your deductions (instead of taking the standard deductions), you can receive a deduction for any charitable donations. But if you're donating an electronic item or recycling it for reuse, you also get to claim it as a charitable donation. While some people might be tempted to throw their broken or used cell phones in the trash, it's pretty terrible for the environment. By donating it to an organization that can recycle or reuse it, you can take that tax break and know that you're as green as can be.
1: Save Income, Save Money
So let's leave on a tip we can all take. While this isn't an across-the-board tax break or credit, it's worth pointing out that by saving energy, we're paying less money for it -- and that means more money in our pockets. Consider it like decreasing your tax withholding: Save a chunk on utilities or energy bills, and that take-home pay is yours to keep.
But how to start? It's actually pretty simple. Energy Star–qualified products and appliances are the first step to creating a more energy-efficient home. The government-backed label means that they're guaranteed to meet certain specifications, and you'll be able to save money and energy by installing them. Remember that if you are searching for the tax breaks we mentioned before, Energy Star–endorsed products are going to meet the specifications you need for a credit. So whether you're installing a fancy new energy-efficient system or just replacing an appliance, you're going to save yourself some income either way -- a boon, any time of year.
- Department of Energy (DOE). "Tax Credits, Rebates & Savings." (Nov. 12, 2014) http://energy.gov/savings/search
- DSIRE. "Website." 2014. (Nov. 12, 2014) http://www.dsireusa.org/
- Energy Star. "Federal Tax Credits for Consumer Energy Efficiency." 2014. (Nov. 12, 2014) http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
- Energy Star. "Save Money and More with Energy Star Qualified Solar Water Heaters." (Nov. 12, 2014) http://www.energystar.gov/index.cfm?c=solar_wheat.pr_savings_benefits
- Energy Star. "Small Wind Turbines (Residential). (Dec. 6, 2014) http://www.energystar.gov/about/federal_tax_credits/small_wind_turbines
- Internal Revenue Service (IRS). "Form 5695." 2013. (Nov. 12, 2014) http://www.irs.gov/pub/irs-pdf/f5695.pdf
- Internal Revenue Service (IRS). "Plug-In Electric Drive Vehicle Credit (IRC 30D)." Feb. 13, 2014. (Nov. 12, 2014) http://www.irs.gov/Businesses/Plug-In-Electric-Vehicle-Credit-(IRC-30-and-IRC-30D)
- Internal Revenue Service (IRS). "Publication 526." 2013. (Nov. 12, 2014) http://www.irs.gov/pub/irs-pdf/p526.pdf
- Internal Revenue Service (IRS). "Qualified Vehicles Acquired After 12-31-2009." June 23, 2014. (Nov. 12, 2014) http://www.irs.gov/Businesses/Qualified-Vehicles-Acquired-after-12-31-2009
- Motavelli, Jim. "Congress Fails to Renew Important Electric Vehicle Tax Credits." PluginCars. Jan. 10, 2014. (Nov. 12, 2014) http://www.plugincars.com/congress-fails-renew-important-ev-credits-129228.html
- TurboTax. "Going Green? Top Tax Breaks" Intuit. 2013. (Nov. 12, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/Going-Green--Top-Tax-Breaks/INF18052.html
- TurboTax. "What are Energy Tax Credits?" Intuit. 2013. (Nov. 12, 2014) https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/What-Are-Energy-Tax-Credits-/INF14087.html