Energy Tax Benefits

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There are many benefits to energy efficiency, and that includes the benefits that put money in your wallet. When you take the initiative to remodel your home with more energy efficient features, you will lower your energy rates and pay for those remodeling projects over time. If you are concerned about the status of the environment, then efficiency is an excellent way to do your part in reducing the amount of dangerous emissions from coal-based power plants. Many homeowners do not realize that there are energy tax benefits that can help enhance all of the other positive aspects of energy efficiency. Once you understand the tax implications of updating your home with more efficient features, you can start to see the tremendous savings that go with being more concerned about how your home handles energy.

Renewable Energy Tax Benefits

Renewable energy sources such as solar and wind power often come with significant tax breaks. If you are looking for a way to lower your energy bill and knock a few thousand dollars off of your tax bill at the same time, then you will want to look into the many renewable energy tax benefits.

Federal Solar Tax Credit

The Federal Solar Tax Credit, also known as the Investment Tax Credit (ITC), was created as an incentive for residential and commercial property owners to invest in solar energy. The federal government recognized that installing a solar system could be quite expensive, therefore it offers tax credits to anyone who makes the investment in solar energy.

In 2016, Congress renewed the ITC and allowed any commercial or residential property owner to deduct up to 30 percent of the total cost of their solar energy installation project from their federal taxes. As technology becomes more prominent and developed, prices tend to drop. The ITC has been adjusted to compensate for those declining costs by offering a sliding scale that fades out in 2022. The schedule is as follows:

In 2020, the deduction percentage will drop to 26 percent.
In 2021, the deduction percentage will drop to 22 percent.
In 2022, residential property owners will no longer be eligible for the ITC, but commercial property owners can still deduct 10 percent of their installation costs. The program is scheduled to end after 2022.

The Renewable Electricity Production Tax Credit (PTC)

The Renewable Electricity Production Tax Credit (PTC) is another renewable energy tax credit that was extended by Congress in 2016. The PTC offers tax breaks for wind power systems that are installed between now and 2019. The program is scheduled to end after 2019. The tax breaks are 2.3 cents/kWh for any wind energy or solar system. If you choose to use the PTC for your solar system, then you cannot use the ITC. Congress has created a declining-scale schedule that eliminates the credit in 2019. That schedule is:

The 2016 credit is reduced by 20 percent in 2017.
The 2016 credit is reduced by 40 percent in 2018.
The 2016 credit is reduced by 60 percent in 2019.

179D Commercial Buildings Energy Efficiency Tax Deduction

The Energy Policy Act of 2005 included a provision numbered 179D that gave tax credits to building owners who took the time and effort to make their buildings more energy efficient. Not only would the energy rates for these buildings go down, but the tax credit of $1.80 per square foot of affected space gave building owners a nice tax break. The tax break is also available to contractors who design and install energy efficient systems into federal government buildings.

The 179D program was halted after January 1, 2016, but any building owner or contractor who qualified for the tax break could take the break for the next 20 years. This means significant savings for a long period of time for the building owners who took advantage of the project. If a building became 10 percent more efficient, then the remodeling project would more than pay for itself over the course of the 20-year tax break.

Any improvements made have to meet the ASHRAE efficiency standards. If the systems were put in place prior to 2016, then the ASHRAE 2001 standards were used. For buildings and systems put into service after the 2016 deadline, the ASHRAE 2007 standards were in effect.

The program required alterations to the HVAC system, lighting system, and the shell of the building that contains insulation and energy saving systems. The types of buildings that qualified for the 179D were:

Retail structures
Office buildings
Industrial complexes
Apartment buildings of four stories or more
Warehouses
Government buildings based on government contracting

How Switching To An Alternative Energy Supplier (ESCO) Can Reduce A Tax Bill

Most people get their energy directly from the local utility that owns all of the distribution lines, and power plants. Starting in the late 1990s, many states deregulated their energy markets, broke up power monopolies, and gave consumers power to choose who supplies their electricity and natural gas.

In the wake of the deregulation, alternative energy suppliers (ESCO) popped up offering different energy options than the ones offered by conventional utilities. For instance, ESCOs generally have longer term plans at fixed rates, while local utilities supply electricity at variable, and often unpredictable rates. The utilities still own power lines, but they are legally obligated to allow other companies supply electricity to their clients. This offers customers different pricing and service options to choose from, and generally saves money longer term.

If you live in a state where you can choose your energy supplier, you often do not pay state or local taxes on your energy bill. Many ESCO companies also offer rates that are lower than the utility prices, and have green energy plans not otherwise available from incumbent supplier.

Energy efficiency has financial benefits that commercial and residential property owners should be aware of. Savvy home owners and constructors should be able to benefit financially through installing energy efficient components, adding renewable energy to supply mix or purchasing green energy through alternative supplier. PowerSetter gives power to consumers to choose their energy supplier, and save money every month on their electricity and gas supply. Click here to see available options.

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