5 eco-friendly ways to reduce your taxes
Looking for a way to reduce your tax lien and help the planet at the same time? Going green can provide you with some excellent tax breaks. There are several eco-friendly ways to reduce your taxes, including the ENERGY STAR initiative, reimbursements for qualified bicycle commuting, alternative energy tax credits, and so on. Even if you are planning on hiring one of the best tax defense companies to help you with your taxes, these deductions and credits can be of significant help. In this article, we will be focusing on the five most important eco-friendly tax deductions, explaining exactly how you can take full advantage of them.
Five eco-friendly ways to reduce your taxes
- ENERGY STAR initiative
- Energy-efficient commercial buildings tax deductions
- Charitable contributions
- Bicycle commuting reimbursement
- Tax credits for alternative energy
Aside from the top five, you may also want to consider tax deductions for recycled and green office supplies, as well as electric vehicle incentives. The latter can allow you to get a tax credit of up to $7,500 for the purchase of a qualified electric vehicle. These credits offer a green way to boost your tax refund amount and can provide you with extra benefits as well. Do note, however, that the credits for electric vehicles vary by manufacturer. For example, if Tesla sells more than 200,000 qualified vehicles, the credits themselves will shrink. They will still be up for grabs but they will be reduced in size.
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Most of the eco-friendly ways to reduce your taxes can be utilized by anyone but small and large businesses usually get the most out of them. The prime example is the first tax deduction on our list:
ENERGY STAR initiative
The Environmental Protection Agency introduced the ENERGY STAR program in 1992. It operates under the authority of the Clean Air Act (section 103(g)), as well as the Energy Policy Act which was established in 2005. This program aims to reduce energy waste, lower greenhouse gas emissions, and save costs on energy bills by providing significant tax breaks.
Furthermore, the program helps with replacing the standard lighting that businesses use with “clean” LED and fluorescent lighting. It also offers various monitoring tools that can help track energy use. Getting on board with this program is one of the many business tax tips for entrepreneurs that businesses can take advantage of. That being said, it is important that you do some research into the program and do some calculations on how much your business can benefit from it.
Additionally, you will also be able to benefit from free usage inspection and have the ability to purchase supplies at reduced rates. You can find out more about ENERGY STAR on their website. The program also works with 520 Habitat for Humanity affiliates to bring clean energy to new affordable homes.
Energy-efficient commercial buildings tax deductions
This tax deduction is commonly known as the 179D deduction. It is mostly used by building owners but tenants can qualify as well. The way that it works is by deducting the cost of any energy-efficient improvements you make, including lighting, HVAC, hot water systems, etc. Qualified taxpayers will be able to deduct anywhere from $0.30 to $1.80 per sq. ft., depending on the technology that is used. The deductions also depend on how much these improvements reduce energy usage.
The first step to being able to qualify for this deduction is to have your building independently certified. To do this, you will need to contact the relevant authorities. Make sure that you are dealing with certified personnel only, as that will protect you from common IRS tax scams as well. As with any tax deduction, it is imperative that you conduct proper research. The best way to start is to consult with tax professionals.
One of the most popular tax deductions, charitable contributions can also be one of the greener options. There is a “catch”, however. What you need to do is donate specifically for the purposes of recycling or reuse. By doing so, you will get all the benefits of standard tax deductions. But you will also contribute to fewer products being created. And that, ultimately, helps the planet the most.
You can also donate computers and electronics in the same manner. By donating electronic equipment and parts, you reduce the landfill. Charitable organizations will find a use for those components, eliminating the need to procure new ones. You will also want to keep good donation records for any non-cash items.
The way non-cash charitable contributions work is through fair market value. Unfortunately, it falls to you to establish what the fair market value of your items is. To do so, you will want to be as specific as possible. This means that you will need to note the condition of the items, as well as their description. Furthermore, if you plan on donating more than $5,000 worth of items, you are going to need an appraisal in writing. You may also need to fill out form 8283.
Basically, charitable donations are one of the best eco-friendly ways to reduce your taxes. You are reducing your tax lien, helping a worthy cause, and helping the planet at the same time.
Bicycle commuting reimbursement
Next up, we have the bicycle commuting reimbursement. You will need to qualify for this program, however. The way that you qualify is through your employer. If your employer offers a reimbursement program for bicycle commuters, your reimbursement will be absolutely tax-free. In other words, the only way to benefit from this tax deduction is to find an employer that offers such benefits.
The deduction itself is not a very large one, however. You can deduct the reimbursement up to $20 per commuting month. Of course, providing that you are using your bicycle to commute to work and back for a substantial period. Also, you cannot get transportation in a commuter vehicle at the same time. Nor can you get any parking benefits or transit passes.
While most people use the reimbursement to maintain their bicycle, the fact that it is completely tax-free makes it “free money”. And, by commuting to work this way, you are reducing gas emissions at the same time. And making the planet a better place.
Tax credits for alternative energy
Another one of the extremely popular eco-friendly ways to reduce your taxes, alternative energy deduction is there to make installing clean energy generators much more financially sound. The government offers numerous incentives, tax deductions, and tax credits for installing small wind turbines, solar cells, and fuel cells. If you are outfitting a new home, it may be in your best interest to consider adding alternative energy generators. Furthermore, as per our property tax relief guide, there’s nothing stopping you from adding a few more tax breaks. The best thing about tax deductions is that you can stack them one on top of another.
Here are some numbers to get you started on alternative energy deductions:
- The maximum incentive for fuel cells is $1,500 per 0.5 kW
- The maximum incentive for microturbines is $200 per kW
- There is no maximum incentive for small wind turbines (which potentially makes them the best investment if applicable)
- Taxpayers can get 26% of their expenditures for solar-powered devices, fuel cells of 0.5 kW or greater, as well as any small wind turbines
As you can see, installing any of the alternative energy sources can be quite beneficial. Not only will you be able to supply your home with energy and reduce your monthly costs, but you will also be able to do it cheaper. Of course, you still need to do a detailed cost analysis before you start installing solar panels or similar. The fact of the matter is that not every home can benefit in the same way.
Tax deductions are just a start
While these eco-friendly ways to reduce your taxes are an excellent way to combine reducing your tax lien and helping the environment, you may want to consider “going green” in other ways as well. While you may not be able to deduct any personal expenses, you still might want to consider being as green as you possibly can. Strive to reduce your carbon footprint by planting trees, walking to work, or purchasing organic food. We all need to do our part, after all, and the more you are aware of how your actions influence the planet, the better.
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If you are looking for even more tax relief tips, or want to find out what the best tax relief companies are, simply browse the Consumer Opinion Guide. We are there to provide our readers with all the necessary information to make the most out of their tax situation!