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CCH can assist you with stories, including interviews with CCH subject experts. Also, the 2011
CCH Whole Ball of Tax
is available in print. Please contact:
 
Leslie Bonacum
(847) 267-7153
mediahelp@cch.com
 
Eric Scott
(847) 267-2179
eric.scott@wolterskluwer.com

Visit the CCH Whole Ball of Tax site often as new releases and other updates will be posted throughout the tax season.

CCH provides special CCH Tax Briefings on key topics at CCHGroup.com/Legislation.

 
2011 CCH Whole Ball of Tax
Release (13) | Back to WBOT

2011 CCH Whole Ball of Tax

Contact:
Leslie Bonacum
, 847-267-7153, mediahelp@cch.com
Eric Scott, 847-267-2179, eric.scott@wolterskluwer.com

How Thinking Green May Put More Green in Your Wallet

CCH Outlines Tax Advantages of Energy-efficient Home, Auto Purchases

(RIVERWOODS, ILL., January 2011) – Environmentally conscious taxpayers striving to make a positive impact on the planet by improving their energy usage can take advantage of several popular tax breaks on their 2010 income taxes. CCH, a Wolters Kluwer business and a leading provider of tax, accounting and audit information, software and services (CCHGroup.com), takes a look at ways to save on your tax bill through incentives established by the American Recovery and Reinvestment Act of 2009 (ARRA).

“Both the types of improvements or purchases that qualify for credits, as well as the maximum credit amounts, which were impacted by ARRA, are still available for this tax filing season,” said CCH Senior Federal Tax Analyst Mildred Carter, JD. “With a national focus on expanding development and production of alternative sources of energy, it makes sense to encourage taxpayers to investigate energy-efficient purchases for their homes.”

Tax Breaks for Homeowners, Condo Owners

The two main energy credits available to homeowners are the non-business energy property credit and the residential energy efficiency property credit, both claimed on Form 5695, Residential Energy Credits. While the names sound similar, the rules and what they cover are quite different.

The non-business energy property credit provides a tax credit of 30 percent to a maximum of $1,500 for the combined 2009 and 2010 tax years. It applies to the installation of insulation and energy-efficient exterior windows and doors, heat pumps, furnaces, central air conditioners and water pumps.

“Pre-ARRA, homeowners were only allowed a 10-percent credit to a maximum of $500,” Carter said. “Even though the post-ARRA credit has significantly expanded, homeowners should be aware that the current $1,500 maximum may apply to more than one year. For example, if $1,000 of the credit was claimed on a 2009 tax return, they can only claim an additional $500 for 2010.”

The 2010 Tax Relief Act extends this credit through 2011. The law returns the credit to its pre-2009 Recovery Act parameters . It reinstates the less favorable credit structure, credit rates and higher efficiency standards that were in place before February of 2009. Thus, you can claim only 10 percent of the cost of qualified energy efficient improvements. The maximum credit amount is reduced to $500 and no more than $200 of the credit amount can be attributed to exterior windows and skylights. The $500 amount must be reduced by the aggregate amount of previously allowed credits the taxpayer received in 2006, 2007, 2009 and 2010.

Under the residential energy efficient property credit, homeowners can receive a credit of 30 percent of the cost for the installation of alternative energy equipment in their home.

The credit is for eligible solar water heaters, solar electricity equipment, fuel cell plans, qualified small wind energy property and qualified geothermal heat pumps. This credit applies for tax years 2009 through 2016.

Check for Certification

However, not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s Web site or the product packaging.

“Those who own single-family homes and condominium unit owners may apply for this credit,” said Carter. “Condo owners can claim the credit by splitting the equipment installation cost with other unit owners and claiming the appropriate amount based on the divided cost.”

Added Incentives for Energy-efficient Appliance Purchases

ARRA provides an added boost to states to encourage residents to purchase energy-efficient appliances. Under ARRA, nearly $300 million in funding was made available for state-run rebate programs for consumer purchases of new ENERGY STAR® qualified home appliances. Dubbed “cash for appliances,” most of these programs began in 2010 and are not tied directly to a tax benefit for purchasers. However, manufacturers of energy-efficient appliances are allowed a tax credit through 2011.

States already offering tax breaks for energy-conscious residents include Connecticut, which provides a sales and use tax exemption for solar energy-generating systems, energy-efficient appliances and light bulbs as well as residential weatherization products. Massachusetts, Minnesota, New Jersey and Wyoming also exempt certain solar- or wind-powered equipment from sales and use or property tax year round.

Many states also offer “sales tax holidays” for energy-efficient purchases including: Georgia, Missouri, North Carolina, Texas, Virginia and West Virginia. Maryland is scheduled to begin offering a sales tax holiday for energy-efficient purchases in 2011.

Alternative Motor Vehicle Credit

If you bought a qualified energy-efficient vehicle in 2010, you may be eligible for a credit on your income taxes. The auto had to be purchased before December 31, 2010 and must satisfy the requirements of the Alternative Motor Vehicle Credit or for these separate credits for:

  • Qualified Hybrid Vehicles (combination of gas and electric engines);
  • Qualified Fuel Cell Vehicles (cells convert chemical energy into electricity);
  • Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrids (includes compressed natural gas, liquefied natural gas, liquefied petroleum gas (propane) and hydrogen vehicles); and
  • Advanced Lean-Burn Technology Vehicles ( use more air than is necessary for complete combustion of the fuel).

Internal Revenue Code Section 30B provides for the Alternative Motor Vehicle Credit and notice 2006-9 lists the procedures for manufacturers to certify vehicles for different energy-efficiency categories. According to the IRS, the amount of the potential credit varies by type of vehicle and which of the four credits applies.

Other Potential Vehicle Tax Deductions

The additional standard deduction for vehicle excise taxes expired at the end of 2009. However taxpayers who purchased a new car, light truck, motor home or motorcycle in 2009 but paid excise taxes in 2010 may deduct state or local sales or excise taxes paid. There is no limit on the number of vehicles that may be purchased, and eligible taxpayers may claim the deduction for taxes paid on multiple purchases. However, the deduction is limited to the tax on up to $49,500 of the purchase price of each qualifying new vehicle. This deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A. Itemizers claim the deduction on either Line 5 or Line 7 of Schedule A. Non-itemizers may claim the deduction on new Schedule L.

The plug-in electric drive motor vehicle credit for consumer-focused plug-in vehicles, which began in 2009, ranges from $2,500 to $7,500. It depends on certain factors, such as battery capacity, determining the value of the credit. For example, there is an additional $200 of credit for each added kilowatt-hour after the minimum 4 kilowatt-hours required.

Taxpayers take the Qualified Electric and Plug-in Electric Vehicle Credit on IRS Form 8834.

However, taxpayers itemizing or claiming certain alternative vehicle credit should be prepared to wait to file their return. Forms 8834 (Qualified Electric and Plug-in Electric Vehicle Credit on IRS Form 8834), 8910 (Alternative Motor Vehicle Credit) and 8936 (Qualified Plug-in Electric DriveMotor Vehicle Credit) are among the forms the IRS has stated will be affected by the processing delay. The IRS has indicated it should be ready to start processing these returns in mid- to late February.

About CCH, a Wolters Kluwer business

CCH, a Wolters Kluwer business (CCHGroup.com) is a leading provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. CCH is based in Riverwoods, Ill. Wolters Kluwer is a leading global information services and publishing company. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands (www.wolterskluwer.com).

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