There are a lot of things we have done to our CPA office building to make it very energy efficient. Unfortunately, most are not deductible. Six-inch walls with brick exterior, double-pane windows, extra insulation in the attic, concrete floor, overhanging porch to keep sun out of windows, centralized HVAC units, etc.
My dad likes to brag about how small the utility costs are for our CPA offices. And he constructed the building in 1979 before such energy efficiency was really thought important by most folks.
Today, Congress continues to try to push folks into certain energy saving activities by offering tax credits. One that is still around after many years is the Residential Energy Credit of up to 10% of the cost of qualified energy saving items added to your principal residence. There is a lifetime limit to the credit of $500. Most folks have long reached that limit and thus, it is not worth it for them to track any energy saving improvements they make any longer. But for younger folks, perhaps just into their first home, this could be a help.
The basic list of qualified expenses for the Residential Energy Credit are, central air conditioners; insulation materials; certain metal roofs; exterior windows and skylights; exterior doors; non-electric water heaters; hot water boilers; electric heat pump water heaters; biomass stoves; and advanced main air circulating fans.
FYI, there are maximum deductible caps for different items, such as $200 for windows, biomass stoves are $300, and circulating fans are $50.
Good news! The Consolidated Appropriations Act extended other energy credits through the end of 2023. Residential solar panels or water heating panels plus fuel cell projects, small wind energy projects and geothermal heat pumps get a much larger potential energy credit. They were supposed to get a deduction of 22% of the cost, but the CAA increased it to 26% through the end of 2023. Also, the CAA added biomass fuel projects to the list that qualifies for this larger energy credit.
What about electric cars? Currently, a qualified electric vehicle can qualify for up to a $7,500 rebate/credit. There are limiters to that. Type of batteries are one of the key determinants. Also, there is a limit to the first 200,000 qualified vehicles by make/model. Thus, almost all Tesla credits are expired, but most other electric vehicles (except a few) are still available because their sales are not that high yet.
Congress is debating raising this credit to $12,500. It might be part of the infrastructure bill that is bouncing around the U.S. Capitol right now. Call me sarcastic, but how that will probably work, is the electric car manufacturers will raise their price, then push the larger credit as an incentive, leaving the buyer paying about the same net price. I know! As I’ve gotten older, I’ve moved closer to that cynic orientation on some things.
Did you hear? Job 26:2a says, “How you have helped him who is without power!”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.