Tax Tidbits for the Environmentalist
Are you greening your home? Tax laws currently provide a limited credit that you can take advantage of in 2009. The recently enacted Recovery Act expands and extends these credits to provide incentives for environment-minded homeowners.
The Internal Revenue Code currently allows individual taxpayers a credit equal to 10% of the amount they pay for certain energy efficient improvements to the insulation of their residence plus designated amounts of the cost of residential energy property expenditures. That is: (a) $50 for each advanced main air circulating fan, (b) $150 for each qualified natural gas, propane, or oil furnace or hot water boiler, and (c) $300 for “qualified energy efficient property,” such as heat pumps, water heaters, and central air conditioners), up to a total of $500 over the lifetime of the taxpayer.
To qualify, these “residential energy property expenditures” must meet specific energy efficiency criteria. Insulation improvements must (1) meet specified efficiency criteria, (2) be used for the taxpayer's principal residence, (3) be purchased new by the taxpayer, and (4) be expected to remain in use for at least 5 years.
The credit was unavailable in 2008, but is available again for 2009.
The recently enacted American Recovery and Reinvestment Act (the “Recovery Act”) extends the credit for an additional year (2010), increase the $500 limit to $1500 for 2009 and 2010, and increases the credit amount from 10% to 30%.
How do you get to work? Current tax laws allow employers to offer tax-free reimbursements for bicycle commuters. The Recovery Act provides parity between drivers and transit users.
Under the Emergency Economic Stabilization Act of 2008, starting in 2009, employers can reimburse up to $240 per year of “qualified bicycle commuting reimbursements,” which are reasonable expenses incurred by the employee during the year for the purchase of a bicycle and improvements, repair, or storage as a non-taxable fringe benefit to the employee. Employees taking advantage of bicycle commuting reimbursements cannot also take advantage of employer reimbursements for commuter highway vehicle transportation, transit passes, or parking benefits.
Under prior law, the allowance for employer reimbursements of public transit and parking was unequal, permitting employees up to $230 per month of qualified parking reimbursements but only up to $120 per month if they choose transit pass reimbursements. The Recovery Act increases the transit pass benefits to $230 per month for 2009, and maintains the indexed amounts of parking reimbursement allowances and transit pass reimbursement allowances on parity for 2010 as well.
*Leila Fusfeld is a vegan attorney at Drinker Biddle & Reath, LLP specializing in business and individual taxes and tax-exempt organizations. www.drinkerbiddle.com
This article does not constitute legal advice. You should contact a lawyer with respect to your own circumstances.