2009 Top Green Tax Credits and Deductions

Tax time is always crazy and this year is no exception. The government has several large bills and it’s often hard to keep track of the ways we can be back as much of our taxes as possible. The good thing is that the government is providing us with more “green” tax credit and deductions than ever before.

Tax Return
Photo by tony_axelrod.

Tax Credit vs. Tax Deduction

Before going too far into the various green tax credits and deductions available, I just want to make sure everybody knows the difference between the two because it is extremely important. A tax credit is a one-for-one dollar reduction in your total tax bill. Think of it as the government literally giving you a credit for a particular amount of money off of your tax bill. A tax deduction on the other hand reduces your taxable income. Once you have all of your deductions taken off of your total income, this amount is then the amount of money you will be taxed against. The difference is a large one in that a tax credit is much more beneficial than a deduction, but both are useful in reducing your tax bill.

Now that I’ve discussed the difference, lets go through some of the top incentives that the government is providing to those who are making their lives a little more green:

Heating and Air Conditioning

By upgrading your heating and air conditioning system to an Energy Star rated system, you could qualify to get a tax credit of 30% of the purchase price with a $1,500 cap. The types of systems include electric, natural gas, propane and oil. There are various minimum efficiency requirements depending for each type of system, so be sure to check the the system before putting this credit on taxes. With energy companies always raising their rates, I consider this an extremely important tax credit. Heating systems are essential and even having it at a low temperature can still cost a fortune. I have heard of people in Maryland getting energy bills of $500+ while only having the temperature at around 65°. By upgrading your system you can not only save on your monthly energy bills, but also get up to a $1,500 incentive to do so.

Renewable Energy System

Renewable energy was really given a large boost during the 2008 Economic Stimulus package including huge tax benefits if you have installed one this past year.

Geothermal Heat Pumps

Geothermal energy has really become popular of late especially in terms of a heat pumps. They allow you to transfer heat from the ground and use it throughout your house with the use of minimal electricity. Many consider a geothermal system one of the most efficient heating systems on the market. The only problem is that they can not be installed everywhere and existing duct work may need to be replaced in order to install one in your home. What’s nice about a geothermal heating system is that it can provide a 30% tax credit with no cap like a traditional heating/cooling system. On top of having huge savings on your energy bill, you could get 30% off the total cost of the system. Be sure to

Solar and Wind Energy Systems

Just as with the geothermal system, both wind and solar systems provide a 30% tax credit with no upper limit. Whether it be solar panels, a solar heating system or a small wind generator, all qualify for the tax credit. There are some qualifications on the solar heating system as it must generate heating for more than 50% of the household. If you are planning on buying a system in the near future, this tax credit is available all the way through 2016.

Insulating Your Home

If you bought new doors, windows, insulation or roofing that provide better insulation for you house, you can get a 30% tax credit of a value up to $1,500. All of these changes can help keep your house warmer/colder depending on the season and you can also get part of the cost funded by the government. The general requirement for many of these items is that they are Energy Star rated or meet a particular quality requirements. If you plan on insulating your house, these tax credits are available for products purchased through the end of 2009.

Cars

If you bought a hybrid, battery electric or alternate fuel vehicle, be sure to take advantage of this tax credit. The tax reduction depends on the particular vehicle you purchase and how efficient the vehicle is. The amount can range anywhere from $250-$7,500 depending on the particular vehicle. There are some restrictions including a vehicle limit of 60,000 per year with tax credits for Toyota and Honda already being used up. Be sure to check with out FuelEconomy.gov or a tax consultant to find out more information on what types of tax breaks are available for different types of vehicles and further requirements.

I covered the major tax breaks available that can help reduce your tax bill whether it be this year’s taxes or next years. With many of the incentives I mentioned above, you not only will be getting a break through you tax bill, but also through your monthly energy bills. As I stated above, if you are not clear of all of the details, be sure to check with a tax professional so you don’t get audited.

Additional Tax Incentives?

If there are any additional incentives that I failed to mention or you are utilizing any of the above that I mentioned, please share them with us.

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Comments

  1. This was a very helpful post! I am about to do my taxes and I am definitely bookmarking this post for the future when I may own a home and be able to to make some of these green improvements.

    The resources you included were also very helpful – thank you for the great post!

    • Miles Parkkonen
    • March 13th, 2009

    Hi:
    I am a 70 year old home owner. I am retired and do not earn no where near enough to get a 30% tax credit for going Green. Is there any rebates or something for people like me?

      • Pays to Live Green
      • March 15th, 2009

      I do agree that most of the tax credits for going green tend to cost a lot of money, but not all of them. As I described in this article, any updates that you make to your house to make it more energy efficient can get you additional tax credits. Things such as better insulating your house, updating an old water heater or hvac system can all bring in that 30% tax credit and decrease your month energy bills. What’s nice about tax credits is that they are simply money given back to you in your tax return. Unlike tax deductions, even if you don’t pay any taxes, you can can still receive money back from a tax credit. Good luck with your taxes and consultant an expert if you have made any updates and are not sure if they can earn your tax credits.

  2. Love the post so much I linked to it in a related blog. Let me know your thoughts. While this blog is centered more to overall green living, I am focused more on energy and water side. I think we have very similar thoughts!

    http://blog.mapawatt.com/2009/04/02/demystifying-incentives/

    • Bertha
    • April 23rd, 2009

    Go Green.

  3. There are many other tax incentives for building a green development. It would be interesting to see those listed in a post as well.

    • Gabriele Webster
    • June 25th, 2009

    I am planing on getting the windows of my entire house tinted with a tint that blocks out 99% uv rays and 65% of heat. Will that qualify for a tax credit?

  4. I think it is fantastic how the stimulus funds are making a difference. They are being taken advantage of all the time with the installation of geothermal heat pumps to replace high energy heating and cooling systems.

  5. Does anyone know what incentives are available for builders and developers for “going green”. Our new spec home has solar, geothermal, and is energy star certified. Many of the incentives seem to go to the homeowner, what about the builder. Any help would be appreciated

  6. Rich,
    My initial thought would be that because your customers are able to take tax incentives for buying your home (solar/geothermal) you benefit from this. Basically, you are able to tell customers they are going to get 30% off the solar portion of their home. I’m guessing you would have to break out the price of solar/geothermal in pricing the home, then the customer uses that for the tax incentive.

    Basically, you benefit because people buy your homes because they are green. One reason they buy is the tax incentive; therefore, you are indirectly already benefiting from this.

    • Brad Valley
    • October 16th, 2009

    Can you install a tankless water heater and spray foam insulation in your house and combine the tax credits? Have a maximum total for the two upgrades equal $3,000?

    • Drew
    • December 17th, 2009

    I have been looking at a water well pump that is powered by solar panels. This system would supply water to most of, if not all of my home. Would this type of system qualify for a tax credit? Theare are also some wind generator systems on the market, would one of those qualify?

    • gavin gilgen
    • January 4th, 2010

    Energy star rated hhmmm..I wonder if the same companies that got our laws changed for using their energy efficient led and other light bulbs are included in this?..It seems a GREAT way to corner the market and put out the competition in particular the smaller companies.We need to find out who the GE lobbyists visited and make sure that congressman is immediately impeached….

      • Pays to Live Green
      • January 14th, 2010

      I understand your point, but I still think it’s great that we do get tax credits and deductions on certain items. There are some companies that are not truthful about whether their appliances are energy star or even energy efficient at all. That means that we have to be more diligent in researching what we are buying and buying the products that are truly more energy efficient.

  7. Great list of deductions and credits for green living. This is one of the few things the federal government gets right…rewarding people who go green!

    • Adam Barlow
    • January 26th, 2010

    TAKE A MINUTE FOR ME AND READ: I’m sitting here filing my taxes and noticing all of these “tax credits” that the government gives to people who drive energy efficient vehicles. Now this is great, but what about people like me who don’t drive EVER? People who bicycle everywhere? or take public transit? Those people should get a break too! If we are going to give tax credits for being green, then I think we deserve the same perk. If anyone is with me on these ideas and want to take this to a higher level together please feel free to email me….

  8. thanks for the list of deductions and credits :)

    • Paula Held
    • February 8th, 2010

    I am thinking of installing a water purification system in my home at Point of Entry (POE) and also for our swimming pool. Do the Federal government or New York State allow a tax credit for either of these?

    • joel collins
    • February 9th, 2010

    What about a tax credit for chosing a service that is Eco-Friendly,,,,,,like ECO-Green Cremation System Inc for your loved ones funeral service,,,,,,and save money too

    • Chi
    • April 2nd, 2010

    Question- do you take 30% credit on the total price of the solar panels or only the amount that you paid? Some utility companies are giving 50% incentives? http://www.americanpv.com/index.php

    • Phil
    • April 9th, 2010

    Can I deduct my green kitchen cabinets? Sears whom I bought them from mentioned I could?

  9. Great Tips. Wish I would have read these tips before april 15th.

  10. Thanks for these. I would imagine there’s a whole new slew of these kinds of breaks for ’10/’11. Hoping you’ll be updating the list for the next year end.

      • Pays to Live Green
      • May 14th, 2010

      I will be updating this list for next year later in this year. Keep an eye out for it.

    • Poor Fat Kid
    • May 30th, 2010

    I was told my family income is too high to partake in any of these energy related tax credits. Is this correct.

  11. Thanks for the guidance and will be looking for the updated list later in the year. “Green” aside, it’d be nice to see a ‘dumbed down’ list like this for other, overlooked tax fields.

    • dan w
    • July 1st, 2010

    do you know if any tax credits are available if you buy a ‘green’ travel trailer or other type of RV?

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