Wolters Kluwer: Now is a great time to look at green tax credits

Wolters Kluwer outlines 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 contains provisions to help taxpayers make the world a little greener. When preparing a 2021 tax return, tax deductions and credits can have a significant impact on reducing or offsetting taxes owed. Wolters Kluwer Tax & Accounting outlines tax deductions and credits to help the environment and save energy. Unless the U.S. Congress acts, many of these tax breaks may not be available for 2022.

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

• Owner Energy Credit. The Non-Commercial Energy Goods Credit, a lifetime credit of up to $500 for the 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 expired for 2022 and beyond
• Credit for plug-in electric vehicle. A credit of up to $7,500 for the purchase of an eligible plug-in electric vehicle remains available for 2021 and 2022 for certain manufacturers who have not yet sold 200,000 vehicles. The credit has already been removed for General Motors and Tesla vehicles
• Fuel cell vehicle credit. The fuel cell motor vehicle credit is available for 2021 tax returns, but has currently expired for 2022 and beyond
• Real estate credit for alternative fuel supply. The 30% credit for alternative fuel 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 rechargeable 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.
• Residential solar and wind credit. The energy-efficient residential mortgage is available for solar-eligible properties, solar water heating-eligible properties, fuel cell-eligible properties, wind-eligible small properties and geothermal heat pump. This is a 26% credit for 2021 and 2022, but is gradually increasing to 22% for 2023 and currently expires after 2023.
• Energy deductions and credits for businesses. There are also many deductions and tax credits available to businesses for various energy efficient activities for 2021 tax filings. A number of these green tax breaks also expire after 2021. These currently expired provisions include the second-generation biofuels, the credit for the construction of energy-efficient new homes, the excise tax credits and expense payments for alternative fuels, and the excise tax credits for alternative fuel blends

WHO: Tax expert Mark Luscombe, JD LL.M, CPA, senior federal tax analyst at Wolters Kluwer Tax & Accounting, can help you sort through the various rules, requirements, and reporting forms for these green tax breaks.

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

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

About Wolters Kluwer