Back in October, when Congress passed the massive $700 billion bailout for the banking industry, many lawmakers were at first uncertain about passing the legislation. Because the bailout was seen as so necessary by many, billions in pork were added to the bill, mostly in the form of tax breaks.
A large amount of these tax breaks were so-called “green tax pork” aimed at incentivizing businesses and individuals to invest in green products.
The bailout contained tax breaks for a wide range of green technologies, including home windmills, corn-powered stoves, plug-in hybrid automobiles and deluxe bicycles. Can’t wait to start cooking cornbread in your corn-powered oven? You can start right away: These tax breaks are retroactive to the beginning of 2008 and will likely last through at least 2016.
For a more complete list of benefits, here is a report from Forbes Magazine:
Solar > For 2008 you can claim one tax credit of up to $2,000 for up to 30% of the cost of a photovoltaic system to generate electricity and another credit of up to $2,000 for 30% of the cost of a system to heat hot water for showers and radiators (not for hot tubs or pools). This is a credit, not a deduction, so it reduces your tax liability dollar for dollar.
Stop! Don’t install a photovoltaic system yet. In 2009 the $2,000 cap on that credit (but not the cap on the credit for thermal systems) comes off. No matter how much you spend, you can get 30% back from Uncle Sam. For a typical $60,000 installation, you’ll get $18,000 knocked off your tax bill. If you don’t owe that much you can carry forward any unused credit and use it in later years. Charles Goulding, a Syosset, N.Y. energy tax lawyer, reports that homeowners who have already started work are asking contractors not to finish until next year, to get the bigger break. “It’s going to cause solar to boom in this country,” he predicts. But first, perversely, it’s causing a delay.
Note: In some cases the federal credits apply only to your net system cost after state incentives–now offered by 18 states. (For a state-by-state listing of green incentives, go to www.dsireusa.org.) Between the state and federal giveaways, installing a solar system might be a win financially (for you personally, if not for the taxpayer). To figure out how much energy a photovoltaic system will generate in your locale, check out the National Renewable Energy Laboratory’s PVWatts online calculator.
Can’t find a contractor? No need to rush; Congress authorized both of the solar credits through 2016, and a Democratic Congress is unlikely to take green credits away, even from rich folks. Even better, you can use the credits to reduce your alternative minimum tax bill as well as your regular tax.
Wind and geothermal > There’s a new $4,000 credit for up to 30% of the cost of installing a home windmill system to generate electricity. (The credit is available even if you’re selling the wind energy back to a utility.) For geothermal systems like the one the Chayets installed there’s a new $2,000 credit. Daniel Ellis, president of ClimateMaster, a manufacturer of heat pumps, says the typical geothermal installation runs about $18,000. So the $2,000 break, he says, “isn’t going to be a deal-changer for most people, but it’s a sweetener.” Like the solar credits, these credits are available for work done between Jan. 1, 2008 and Dec. 31, 2016.
The National Renewable Energy Laboratory has an In My Backyard tool that estimates the electricity you can produce with a windmill at www.nrel.gov/eis/imby. For geothermal the best tool comes from Natural Resources Canada, downloadable at www.retscreen.net.
Home improvements > The new law resurrects for 2009 a $500-per-tax-filer lifetime tax credit for energy-efficient home improvements. This credit was in effect in 2006 and 2007 but isn’t available for work performed in 2008. (Couples who file separately can claim only $250 each.)
It’s not hard to use up your $500 lifetime allotment. You can get up to a $500 credit (equal to 10% of materials costs) for insulation or exterior doors; up to a $200 credit (equal to 10% of installation and materials costs) for windows; up to $150 for an energy-efficient furnace or boiler burning gas, propane or oil; and up to $300 for a new central air system or water heater meeting certain specs. New for 2009 is the $300 credit for a corn stove, that being something to heat your home. (Why is this country using food to heat homes? Same reason it uses food to run cars.) To see if the equipment you’re buying qualifies, go to www.ase.org/taxcredits.
Transportation > The new law creates a credit of up to $7,500 for the first 250,000 buyers of plug-in electric vehicles, beginning in 2009. So far the Chevy Volt, scheduled to come on the market in 2010 with an estimated $40,000 sticker price, is the only vehicle that seems to qualify. Meanwhile, the old hybrid-car tax credit of up to $3,150 is still available for certain models but not the most popular ones. That break, passed in 2005, applied in full to only the first 60,000 hybrids from each manufacturer; Toyota (nyse: TM – news – people ) has run out of credits, and Honda (nyse: HMC – news – people ) is likely to do so by year’s end. (Warning: You can’t use a hybrid credit to reduce your AMT.)
Congress even found a place in the bailout for a bicycle tax benefit–an idea that Representative Earl Blumenauer (D–Ore.), who bikes to work, has been peddling for years. Beginning in 2009 employers who provide transit benefits (either pretax salary reduction plans or prepaid vouchers) for bus, train, van pooling or parking can provide up to $20 a month in tax-free bicycling benefits. (Bike commuters can’t double-dip and get transit or parking vouchers, too.)
Congress has left it to the IRS to fix the details, but expenses that could be reimbursed from a pretax or employer-paid bicycle benefit are likely to include the costs of buying, fixing or storing a bike. No word yet on Spandex.