Claim Your Tax Credits for Benefiting the Environment

By Catherine Gordon, Toolkit Staff Writer

Did you make energy efficient improvements to your home or purchase energy-efficient products last year? If so, you may qualify for a tax credit on your 2010 tax return.

As we get closer to this year's tax return filing deadline, the IRS has specifically highlighted six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009:

• Residential energy property credit. This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. The credit is equal to 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows, and energy-efficient heating and air conditioning systems.
• Residential energy efficient property credit. This tax credit applies to purchases of qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment, and installed wind turbines and geothermal heat pumps. The credit, which runs through 2016, is 30 percent of the cost of qualified property.
• Plug-in electric drive vehicle credit. The minimum amount of the credit for qualified plug-in electric drive vehicles purchased in 2010 is $2,500, and the credit tops out at $7,500, depending on the battery capacity. The credit runs through 2014 and is phased out for each manufacturer after they sell 200,000 qualifying vehicles.
• Plug-in electric vehicle credit. This tax credit applies to two types of plug-in vehicles - certain low-speed electric vehicles, and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after February 17, 2009, and before January 1, 2012.
• Credit for conversion kits. This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after February 17, 2009. The maximum credit, which runs through 2011, is $4,000.
• Treatment of alternative motor vehicle credit as a personal credit allowed against the alternative minimum tax (AMT). Starting in 2009, the alternative motor vehicle credit, including the tax credit for purchasing hybrid vehicles, can be applied against the alternative minimum tax.

Take Action. While many of the "green" credits are narrowly targeted, so that the number of people eligible for them is small, if you are part of that group, these credits can be quite beneficial. This is especially true in the case of tax credits, which are dollar-for-dollar reductions in tax liability. See the discussion of credits benefiting the environment for more information on these credits, as well as other environment-friendly credits for individuals and businesses.

Posted March 14, 2011.