Environmental tax breaks
Happy Earth Day! From humble beginnings 39 years ago, the April 22 day of environmental consciousness has become a worldwide phenomenon.
And tax writers, both at the federal and more local levels, have gotten into the green act, too.
The Energy Tax Incentives Act of 2005 created a tax credit for some home improvements that enhance a property's energy saving abilities.
Most of the more easily implemented tax breaks expired at the end of 2007.
But folks who in 2008 install a solar-powered water heater or a solar system that generates residential photovoltaic electricity can still get a credit of up to a $2,000. And last week, the Senate Finance Committee included an extension of the solar provisions in a larger tax measure to continue several expiring tax breaks.
Several business-specific energy tax breaks also are part of the measure. The committee's chair, Sen. Max Baucus, D-Mont., has vowed to "build upon this package as it makes its way through the legislative process, with edits and additional items."
Although lawmakers in D.C. are still debating energy incentives, many state and local governments, as well as utility companies, still reward actions that promote renewable energy and energy efficiency. Check out what's available in your area via the Database of State Incentives for Renewables and Efficiency, or DSIRE, interactive map.
Automotive energy: For most of us, though, the first thing that comes to mind when we talk about saving energy is the price of gasoline. Pump prices surpassed $3.50 per gallon nationwide for the first time ever this week.
Taxes play a part here, both in adding to our costs and potentially saving us some dollars.
The federal government collects a federal gas tax of 18.4 cents per gallon. States then add their own levies. These additional charges include sales taxes, gross receipts taxes, oil inspection fees, underground storage tax fees and miscellaneous environmental fees.
The American Petroleum Institute says that in January the U.S. average gasoline tax, counting both state and federal levies, was 47 cents per gallon.
Not surprisingly, California led the way collecting 63.9 cents per gallon. Down here in Texas, state tax collectors get 38.4 cents per gallon from drivers. But that's not the smallest fuel tax figure. Thirteen other states have smaller fuel taxes, with Alaska offering the cheapest fuel, taxwise anyway, by charging only 26.4 cents per gallon in state gas taxes.
Thanks to the tax charges and the rising cost of oil, many have switched to more fuel-efficient vehicles. And the federal government has encouraged that somewhat via the tax credit for hybrids and other alternative fuel vehicles.
This tax break officially continues through Dec. 31, 2010, but in reality it's no longer available for some of the more popular hybrids. Because of the way the credit law was set up, once a manufacturer sells 60,000 hybrids, the tax break begins phasing out until it is eliminated.
That happened last year to Toyota and its luxury line of Lexus hybrids, thanks primarily to the popularity of the Prius. You can still get good mileage by buying one of the autos, but you'll no longer get a tax break.
The same thing now is happening to Honda. Tax credits for that automaker's hybrids were cut in half on Jan. 1. The credit will drop again on July 1.
But full tax credits remain for dozens of other fuel-efficient vehicles.
So if this Earth Day, when the U.S. average price of gasoline is $3.50 per-gallon, you're thinking of making the switch to a more fuel-efficient car, you might want to make the tax credit amount part of your evaluation.