Tax and Financial News for December, 2010

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Renewable Energy Systems Fuel Tax Incentives

The climate of our economy has brought a great deal of attention to investing in renewable energy systems and going green. With an opportunity to stimulate the economy and increase jobs, this concept is receiving a stronger drive than ever.

Many companies and retailers, including Google, Wal-Mart, Target and Kohl’s, have already announced plans for renewable energy projects. The tax incentives and cost efficiency are intriguing.

Despite this push, current changes in legislation have altered ongoing incentives and established new ones. Your tax professional should be familiar with the existing benefits of energy systems.

For example, the Investment Tax Credit is an asset accessible to companies that allows them to participate in accomplished energy projects. IRC Section 48 provided stipulations that enabled the passage of energy projects dealing with solar, geothermal and fuel cells – and heat, power, wind and micro-turbine technologies play an important factor as well. IRC Section 48 will provide the tax credits, deductions and exclusions in these areas.

The tax discounts generated from commercial buildings with adequate energy can compensate for the price of the parts that make up the buildings. In this case, the parts are deemed as devalued property if they are established in a U.S. building that meets the requirements for lighting, heating, cooling and ventilation.

According to guidelines created by the American Society of Heating, Refrigeration and Air-Conditioning Engineers, the systems must lower the overall yearly energy usage by 50 percent or more. The building also must be certified by a person the IRS regards as “admissible to conclude that it meets the regulations by using an accepted computer software program.”

On the domestic front, if your newly built home meets the requirements to be energy-efficient, you can receive a tax credit of up to $2,000. In order to get this discount, you must use the home for personal living during a taxable year. Also, the residence must be within the boundaries of the United States and comply with the various energy-saving demands.

These demands prescribe that the home has yearly heating and cooling energy utilization that is 50 percent lower than a unit consistent with the 2003 International Energy Conservation Code, while 20 percent of the home must represent an upgrade to the part of the home that divides the interior and exterior environment.

In addition, the property must comply with rules implemented by the National Appliance Energy Conservation Act of 1987, as well as correspond to the federal Manufactured Home Construction and Safety Standards. If all these requirements are met, you may receive the full credit.

Considering how expensive these systems are to establish, tax incentives could make the difference in deciding whether it’s worth this work to lower your tax liability. By reducing the investment price of these systems, the compensation time is much faster, providing additional leverage.

As green technologies become more renowned, the growth will result in lower costs for the systems. Even with organizations doing what they can to establish energy-saving tactics, it still costs less for small businesses and individuals to invest in refurbished energy and energy-efficient technologies. As the government steadily lengthens tax incentives and the rules of energy procedures become more rigid, the benefits of tax incentives and cost-efficiency for green technologies should continue to increase in the future.

Schedule an appointment with your accountant to review all available energy tax credits. In addition, more information is located at the U.S. Department of Energy Tax Incentives website (


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