Over the last couple of weeks, I have discussed the financial benefits of green living. There are a lot of ways that you can cut your personal expenses by living a more sustainable lifestyle. Some of my readers have specifically asked for tips on cutting taxes by going green.
Here are some tips that you should keep in mind. You may qualify for tax credits, a VAT reclaim or simply avoid paying sales taxes by minimizing purchases.
Going green cuts your taxes on gasoline
Gasoline taxes are rising sharply throughout the country. California recently passed a new bill that has raised the state gas tax to 38.2 cents a gallon. Other states are following suit. These taxes are broken up into two parts: an excise tax (a flat fee on every gallon of gasoline) and a sales tax, which varies by price. This means that gas taxes can rise sharply with gasoline prices.
People that drive green vehicles can minimize or even avoid these costs. Keep in mind that the more environmentally friendly your vehicle is, the more you will save on tax credits.
Take advantage of simple green home improvement credits
The federal government offers green tax credits equivalent to 20 to 30% of the cost of green home improvements. There are many ways to qualify for this credit. Most people talk about solar panels, wind turbines and other major changes.
However, you don’t need to renovate your home to be totally green. You can also qualify for these credits by making simple improvements to your home if you use green building materials or contractors. Money Crasher’s Brian Martucci explains that even the interest on loans for these improvements can be claimed as a deduction or credit.
“Federal, state, and local tax credits and other financial incentives partially offset the cost of a slew of green energy and home efficiency projects, helping more homeowners finance them out of their savings or afford the principal and interest payments on FHA 203k renovation loans. Here’s a look at the present lineup of federal tax credits and incentives, plus a representative slice of the hundreds of state and local credits and incentives available today.”
Make sure that you keep documentation of these credits. You do not need to attach them to your return. The IRS explains the rules here.
“Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.”
If you live outside the United States, you may also be able to reclaim VAT for green purchases.
Take advantage of Energy Star products
Products that receive Energy Star certification consume at least 10% less energy than their alternatives. If you purchase any of these products, you may qualify for a tax credit of up to 30% cost of purchase per a income tax calculator. This credit is worth up to $1500, which is worth more than many VAT reclaim offers.
Need a new car? Look for green vehicles
The federal government also provides incentives for consumers to purchase screen vehicles. The green vehicle tax credit is worth up to $7500.
If you are interested in buying a new vehicle, you could cut your costs sharply. You may pay even less than you paid for a gas guzzler after the credit is factored in. Of course, you will save even more money on gas and fuel taxes over time as well.
Take Advantage of Great Green Living Tax Savings
There are plenty of ways that you can save money by going green. You can even make it easier on Tax Day. Take the time to understand the impact of different taxes and ways that they can be cut by following a more environmentally friendly approach.