Now is a great time to look at green tax credits

Wolters Kluwer outlines the tax deductions and credits available on 2021 tax returns that help taxpayers save energy and protect the environment.

What: In the spirit of St. Patrick's Day, a holiday focused on all things green, and the tax law has some provisions to help taxpayers make the world a little greener. When preparing a 2021 tax return, both deductions and tax credits can make a significant impact in reducing or offsetting taxes owed. Wolters Kluwer Tax & Accounting outlines the tax deductions and credits to help the environment and save energy. Unless US Congress takes action, many of these tax breaks may not be available for 2022.

Why: Many of the green tax breaks have only been enacted by US Congress for short periods of time. They regularly expire and need to be renewed. Sometimes this happens retroactively, even a year or more after they have expired. Many have currently expired for 2022 and utilizing them on a 2021 tax return may be last chance taxpayers have unless US Congress acts. 

• Homeowners’ Energy Credit. The nonbusiness energy property credit, a lifetime credit of up to $500 for installation of energy efficient items such as windows and doors and energy-efficient systems such as central air conditioners and water heaters, was available for 2021 but has expired for 2022 and beyond
• Plug-In Electric Vehicle Credit. A credit of up to $7,500 for the purchase of a qualifying plug-in electric vehicle remains available for 2021 and 2022 for some manufacturers who have not yet sold 200,000 vehicles. The credit has already phased-out for General Motors and Tesla vehicles
• Fuel Cell Motor Vehicle Credit. The fuel cell motor vehicle credit is available for 2021 tax returns but has currently expired for 2022 and beyond
• Alternative Fuel Refueling Property Credit. The 30 percent credit for alternative fuel refueling property, up to a maximum of $30,000 for depreciable property and $1,000 for personal property, is available for 2021 tax returns but has currently expired for 2022 and beyond
• Two-Wheeled Plug-In Electric Vehicle Credit. The credit for qualified electric motorcycles, the lesser of ten percent of the cost of the vehicle or $2,500, is available for 2021 tax returns but has currently expired for 2022 and beyond
• Solar and Wind Residential Credit. The residential energy efficient property credit is available for qualified solar electric property, qualified solar water heating property, qualified fuel cell property, qualified small wind energy property, and geothermal heat pump property. It is a 26 percent credit for both 2021 and 2022 but phases down to 22 percent for 2023 and currently expires after 2023
• Energy-efficient Deductions and Credits for Businesses. There are also many tax deductions and credits available for businesses for various energy-efficient activities for 2021 tax returns. A number of these green tax breaks also currently expire after 2021. These currently expired provisions include the Second-Generation Biofuel Producer Credit, the Credit for Construction of New Energy-Efficient Homes, the excise tax credits and outlay payments for alternative fuel, and the excise tax credits for alternative fuel mixtures

Who: Tax expert Mark Luscombe, JD LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help sort through the various rules, requirements and reporting forms for these green tax breaks.

PLEASE NOTE: These materials are designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering legal, accounting, or other professional services.

Contact: To arrange interviews with Mark Luscombe and other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact Bart Lipinski.