Green Vehicles Tax Credits

As we discussed in the previous blog post, there is a great tax credit available for individuals who install qualified energy efficient property, such as solar panels, to their homes.  You will be happy to know there are also great tax credits available to purchasing "green vehicles."

Currently, there are 2 different tax credits available depending upon the type of "green vehicle" you are purchasing:

1. Alternative Motor Vehicle Tax Credit.  This tax credit is available to individuals who purchase a qualifying fuel cell motor vehicle.  These vehicles are propelled by the power derived from one or more cells that convert chemical energy directly into electricity.  At this time, there are only 2 vehicles that qualify for this credit: 1) the Mercedes-Benz F-Cell; and 2) the Honda FCX Clarity Fuel Cell. However, as this technology continues to advance more vehicles may qualify and will be listed here.
   
   The value of this tax credit depends upon both the weight of the vehicle and when it is placed in service.  For instance, the base credit for vehicles under 8,500 pounds is $4,000 while the credit for heavy vehicles ranges from $10,000 to $40,000.
   
2. Plug-In Vehicle Tax Credit.  This tax credit is available to individuals who purchase or lease a qualifying, four-wheeled plug-in electric vehicle manufactured primarily for use on public streets.  The value of this credit ranges from $2,500 to $7,500.  The base credit is $2,500, and an additional $417 for each kilowatt hour of battery capacity starting at 5 kilowatt hours, up to a maximum of $7,500.
   
   This credit will begin to phase out for a manufacturer's vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States, determined on a cumulative basis.  However, at this time no manufacturer has come close to selling 200,000 qualifying vehicles.  Click here for the IRS's list of cumulative sales by manufacturer.
   
   To qualify for this credit, the vehicle must: 1) be manufactured primarily for use on public roads; 2) weigh less than 14,000 pounds; and 3) be able to exceed a speed of 25 miles per hour.

If you are interested in learning more about "green energy" tax credits, please do not hesitate to contact me.

As always, I appreciate your feedback.  Please leave your thoughts in the comment section below.

Residential Energy Efficient Property Tax Credit

Have you considered installing solar panels to your home?  Have you heard that there is a tax "rebate" and want to know how that works?

The Residential Energy Efficient Property Tax Credit is available to taxpayers who install qualified equipment to their home.  It does not have to your main residence (it can be on a second/vacation home).  Qualified equipment includes:

• Solar Electric Equipment (i.e., solar panels);
• Wind Turbines; and
• Solar Hot Water Heaters.

The tax credit is equal to 30 percent of the cost of the alternative energy equipment that you have installed at your principal residence.

Unlike most other tax credits, there is no limit on the amount of credit available for most types of property.  However, this tax credit is non-refundable.  That means if you are not able to use the entire tax credit, then the unused portion is carried forward to the next year.

The Residential Energy Efficient Property Tax Credit is available for any qualified equipment that is installed before December 31, 2016.  However, it is currently unclear whether any unused portion of the credit will be allowed to be carried forward past the 2016 tax year.

Example
Gary and Karen had solar panels installed on their principal residence on June 1, 2014 for a total installation cost of $90,000.  They are entitled to a tax credit of $27,000 (30% of the $90,000 installation cost).

Every year, Gary and Karen have a total federal income tax due of $12,000.

For the 2014 tax year, their usual $12,000 federal income tax bill was reduced to $0.  Gary and Karen will be receiving a tax refund from the IRS for any income tax withholdings or estimated tax payments that they made during the year.  They also have an unused tax credit of $15,000 that will be carried forward to 2015.

For the 2015 tax year, again their usual $12,000 federal income tax bill was reduced to $0.  Again, instead of writing a check to the IRS they will be receiving a refund for any income tax withholdings or estimated tax payments they made during the year.  They have an unused tax credit of $3,000 that will be carried forward to 2016.

For the 2016 tax year, they will finally exhaust their remaining tax credit but only have to pay $9,000 of federal income tax.

If you are interested in learning more about the Residential Energy Efficient Property Tax Credit, or other tax credits, please do not hesitate to contact me.

As always, I appreciate your feedback.  Please leave your thoughts in the comment section below.