How to get thousands of dollars in tax credits

[one...two...tree 2,762]

Who says loving the planet isn't worth it? Being environmentally minded could save you a couple hundred or a few thousand dollars at tax time.

If you've made energy-saving improvements to your life in the past year, you may get some tax credits on your federal and state income taxes. Follow the links in this article to see what you qualify for.

Cars

The tax break that gets a lot of attention is for hybrid cars. It's true, when you buy a fuel-efficient hybrid, the federal government gives you a credit off your income tax.

The specific amount depends on the hybrid you bought. If you got a Ford Escape SUV, you could get up to $3,000. A Honda Civic garners $2,100. And a Mercury Mariner SUV earns you up to $3,000. Check the IRS chart to find your vehicle.

And note that popularity has its price. Toyota and Lexus have sold so many hybrids that their cars are no longer eligible for tax breaks. If you bought a Toyota or Lexus hybrid after October 1, 2007, you won't get a credit. But you're still saving money on gas, and you're polluting less.

Some states also give you a tax break for buying a hybrid car. The Department of Energy has a database of state incentives and laws related to alternative-fuel vehicles. While many of the incentives are geared towards businesses, you'll find some useful stuff for personal taxes too.

For example, Oregon gives a tax credit of up to $1,500 when a resident buys a hybrid car such as a Prius or Ford Escape. Colorado offers a credit of up to $3,013 for buying a hybrid, depending on the model. In Illinois, hybrid vehicle buyers can get a $1,000 rebate from the state.

One to plan ahead for -- starting January 1, 2009, in Washington, you can buy a hybrid car with no state sales and use tax.

Home energy

If you're deep green and have gone beyond hybrid to alternative fuels, you'll get a few more tax benefits. Many states offer credits for converting a vehicle to using biofuels, and biofuels themselves are often untaxed.

Kansas gives a tax credit of up to 40% of conversion cost if you switch to biofuels. Montana's credit is 50% of the conversion cost. Utah also gives a 50% credit for the conversion cost to clean-burning fuels.

In Oregon, if your car uses biofuels, you get an income tax credit of $0.50 per gallon up to $200 per vehicle. If you make and use your own biofuels in Oklahoma, you're not subject to state motor fuel excise tax.

The other big area you can save green by going green is home energy. Making your house more efficient saves money on your utility bills in the long run, and you can get a tax cut too.

If you upgraded your home's insulation, windows, doors, metal roof, water heater, or heating or cooling system in 2007, you may get a credit of up to $500 off your taxes. The new items have to meet energy-efficiency codes -- this Energy Star chart shows what qualifies.

Did you go solar recently? That'll net you a bigger break. Solar panels and solar water heaters earn you a credit of up to $2,000 off your taxes from the feds. And that's not all.

Many states offer an array of tax deductions for adding solar energy to your home. The Database of State Incentives for Renewable Energy lists tons of credits, rebates, grants, and more ways to cut the cost of green power.

In some states, such as Texas, and counties, like parts of Virginia, solar energy systems are exempt from your home's property tax value, which can be a real savings.

Quite a few states give a credit back for the sales tax paid on solar panels or the equipment is totally exempt from tax. Appropriately enough, the sunshine state of Florida hasn't charged sales tax on solar energy systems since 1997. More recently, Vermont, Minnesota, Washington, and New York jumped on the no-solar-sales-tax wagon.

Other benefits abound. If you take out a qualified loan to buy those solar panels, California lets you deduct the loan's interest on your state taxes.

In New York, South Carolina, and Arizona, you can get a tax credit equal to 25% of the costs of your solar energy system.

If you live in Louisiana, look for a new tax credit for installing solar panels after January 1, 2008.

Solar isn't the only home-improvement that can get you a state tax cut. Oregon has a host of credits for buying energy-efficient appliances like clothes washers and making upgrades to your central air conditioning. Idaho encourages owners of older homes to add new insulation by giving a tax deduction of 100% of the cost.

Charity

Lastly, don't forget about those charitable contributions. Giving green gets you another tax credit. Donations to qualified non-profit groups, such as those dedicated to educational or scientific purposes or the prevention of cruelty to animals, are tax deductible.

Planning ahead for 2008's taxes? Unfortunately, many of this year's federal credits relating to energy savings expire after the 2007 tax season. Several bills are in Congress to extend these credits, which were only available for a measly two years. If you want to encourage more energy savings, contact your representatives and tell them to support these tax incentives.

http://green.yahoo.com/blog/greenpicks/103...oing-green.html

[PlatyPius 5]

Already did this last year.

New high-efficiency furnace, new windows, insulation, new doors, new water heater. Not much left for me to do to get more discounts, eh? (Can't afford solar)

[Marilyn. 340]

we use a lot of those energy saving light bulbs.. do you think we can get a tax break for them??

Edited January 26, 2008 by MarilynP

[one...two...tree 2,762]

we use a lot of those energy saving light bulbs.. do you think we can get a tax break for them??

That would be nice, but probably not much of a refund.

[Amby 490]

buy a solar oven and bake stuff outside in the summertime. they work really well and the house doesn't heat up from having the oven on.

http://www.solarovens.org/

Edited January 26, 2008 by Amber&Neil