Green Tax Roundup

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In recent columns we have discussed tax incentives that the federal government offers to increase demand for energy saving and energy-generating technologies.  Such incentives do not stop at the federal level.  West Virginia recently enacted two initiatives to help taxpayers save money while helping the environment.  These initiatives are the Energy Star Sales Tax Holiday and the Residential Solar Energy Tax Credit.  In this article we will discuss these new, WV incentives and review existing federal credits.  Keep this information handy as you shop for new appliances or consider renovating your home.  It may help to reduce your electric and tax bills while shrinking your carbon footprint.

1. The Energy Star Tax Holiday will reduce the price of certain Energy Star products by 6% if purchased between September 1st and November 30th this year.  The “holiday” achieves this savings by exempting these purchases from sales tax.  To qualify the product must cost $5,000 or less, be a qualifying Energy Star product, and be purchased for personal use.  Purchases made for commercial or business use do not qualify. 

The tax exempt purchases apply to both new and used Energy Star products.  Internet and catalog purchases also qualify as long as the items are both paid for and delivered between September 1st and November 30th.  Shipments delayed due to backlogs or being temporarily out-of-stock will still qualify.

The Energy Star designation is awarded by the Environmental Protection Agency to products that meet certain energy efficiency guidelines.  According to a West Virginia Tax Department, the use of Energy Star products can reduce household energy consumption by 30%, saving the typical household more than $700 each year. 

2. In June, 2009 West Virginia passed a tax credit for those who purchase and install qualified solar property after July 1, 2009.  The credit will reimburse 30% of the costs of purchasing and installing solar systems that generate electricity, heat or cooling, or provide hot water for the residence they own.  To qualify, water heating systems cannot be used to heat a pool or hot tub and must derives at least 50% of its heat-energy from the sun.

The credit maxes out at $2,000 and is non-refundable (meaning it will reduce your tax liability to zero but will not generate a refund beyond taxes paid in).  Any credit remaining after being applied to the current year can be carried forward to future years.  One caveat: legislative rules have yet to be written for this new credit.  As a result, we are awaiting clarification on a number of issues.  These include; whether residential rental properties and vacation homes qualify, whether the $2,000 maximum is an annual limit, a lifetime limit per taxpayer, or per-residence limit, and whether the code’s phrase “taxpayer who installs or causes to be installed” includes residential builders. 

The West Virginia Sales Tax “holiday” and solar credit round off a generous collection of tax incentives for those who decide to go green.  Federal incentives include the Residential Energy Property Credit (REPC) and the Residential Energy Efficiency Property Credit (REEPC - also called the Residential Renewable Energy Tax Credit).  We have discussed these credits before and will briefly summarize below.  Please visit http://www.Journal-news.net for more information. 

3. The Residential Energy Property Credit reimburses taxpayers for 30% of qualifying, energy-saving home improvements “placed in service” between January 1st 2009 and December 31, 2010.  The total credit for all improvements cannot exceed $1,500 for the two years combined.  Qualifying products include certain Energy Star-certified roofing, water heaters, HVAC systems, windows and doors, insulation, and biomass stoves.  Installation costs of HVAC systems, water heaters, and stoves can be included when determining the credit.  Installation costs for windows, doors, insulation and roofs, however, do not qualify.  The credit is non-refundable and cannot be carried forward.

4. The Residential Energy Efficiency Property Credit will reimburse taxpayers for installing certain “green” energy systems in their new or existing homes.  The credit provides a nonrefundable, unlimited reimbursement for 30% of costs incurred to purchase and install the following systems between January 1st 2009 and December 31st 2016: solar electric, solar water heating, wind-energy, and geothermal heat pump equipment.  Unlike the REPC, any unused credit can be carried forward to the following tax year.

The tax incentives for “going green” have never been better.  If successful, that is, if they increase demand for green products and competition among suppliers, then costs will decrease while green technology advances.  If this happens we will all reap the rewards of cheaper energy, a cleaner environment, and energy independence.

Brett Hersh's avatar
  • Author: Brett Hersh
  • Bio: Brett Hersh, EA, MBA, is the owner of HBS TAX & Small Business Experts. He is an Enrolled Agent (EA) with the IRS and licensed by the US Treasury Department to prepare all tax returns and represent taxpayers before the IRS for audits, collections and appeals. He is also Dave Ramsey’s ELP for Tax and Accounting, a continuing education instructor for tax professionals through Lorman Education, and a local speaker/presenter on the topics of tax and business growth. He can be reached at (304) 267-2594.