Taxes 2022: Don’t Forget to Use These 7 Green Tax Credits When You File

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With just days to go to file your 2021 tax return, you need to make sure you have exhausted all opportunities to save money and claim available credit where you can. For many eco-aware homeowners and business owners, going green can save you a lot of green on your taxes.

There are plenty of fast, easy and effective environmentally conscious decisions you can make around your house, but they don’t permanently reduce your fossil-fuel-burning appliances’ carbon footprints or improve your home’s ability to retain warm or cool air. To make a lasting, meaningful difference in your home’s energy profile, your home requires more involved — and often expensive — home improvements and upgrades. On the road, many drivers are switching to hybrid or electric vehicles to avoid soaring gas prices and drive a cleaner alternative. But EVs aren’t cheap either.

Fortunately, several federal tax credits are designed to make boosting energy efficiency more attractive to EV drivers, homeowners and various types of business owners by partially offsetting the high cost of green energy purchases and projects. And because we are talking about tax credits, they are dollar-for-dollar reductions in your tax bill because the credit is applied against your gross income (whereas tax deductions come into play after your gross income is determined). 

Here are some of the credits to consider. Note that most “green” tax credits have expiration dates, so this year might be the last to use them for your 2021 filing.

Homeowners’ Energy Credit 

Extended to cover the installation of energy-efficient items through December 31, 2021, the nonbusiness energy property credit is worth a maximum of $500 for all years combined, from 2006 to its expiration of qualified energy efficiency improvements (home insulation, exterior doors and windows, some roofing materials) and residential energy property costs (electric heat pumps, natural gas, oil and propane water heaters, furnaces and boilers, central air conditioning). 

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Solar and Wind Residential Credit

Under the Consolidated Appropriations Act of 2021, the renewable energy tax credits for fuel cells, small wind turbines, and geothermal heat pumps now feature a gradual step down in the credit value, the same as those for solar energy systems. This credit expires at the end of December 2023 and has gradually decreasing credits for the following installation dates: 30% for systems installed by December 31, 2019, 26% for installations between December 31, 2019, and January 1, 2023, and 22% for systems placed in service after December 31, 2022, and before January 1, 2024.

Plug-In Electric Vehicle Credit 

For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle that draws propulsion energy from a battery with at least 5-kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt-hour of battery capacity more than 5-kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500. This credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (Tesla and General Motors have already phased out).

Fuel Cell Motor Vehicle Credit

A tax credit of up to $8,000 is available for the purchase of qualified light-duty fuel cell vehicles, depending on the vehicle’s fuel economy. Tax credits are also available for medium- and heavy-duty fuel cell vehicles; credit amounts are based on vehicle weight. The fuel cell motor vehicle credit expired December 31, 2021.

Alternative Fuel Refueling Property Credit

This credit is generally 30% of the cost of qualified property, with the credit limited to $30,000 for businesses at each separate location and $1,000 for property installed at a taxpayer’s primary residence.

Qualifying property included electric charging infrastructure as well as other forms of clean-fuel refueling property.

Two-Wheeled Plug-In Electric Vehicle Credit

You may be eligible for a credit if you purchased a 2-wheeled vehicle that draws energy from a battery with at least 2.5-kilowatt-hours and may be recharged from an external source. The credit is 10% of the purchase price of the vehicle with a maximum credit of $2,500 and is available for 2021 tax returns (expired for 2022 and beyond).

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Energy-Efficient Deductions and Credits for Businesses 

Your business can get a tax credit for specific energy-saving investments in a variety of forms. Most of these green energy tax credits and incentives are valid through the end of 2021, including the Second-Generation Biofuel Producer Credit, the Credit for Construction of New Energy-Efficient Homes, the excise tax credits and outlay payments for alternative fuel and alternative fuel mixtures.

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