Tuesday, October 21, 2008

Tax breaks for the green community

The latest tax bill has some nice benefits for the sustainability community to help us green our economy. For instance, starting in 2009, employers can give bicycle commuters a tax free fringe benefit of up to $20 per month to cover the cost of pedaling to work including repairs, storage, accessories and even the cost of a bike. Employers and employees should act now to put this in place starting January 1st.

Also, the credit for residential energy saving improvements will return in 2009. The 10% tax credit has been expanded to include biomass fuel stoves as well. You may want to delay the installation of skylights, windows, outside doors and high-efficiency furnaces, water heaters and central a/c units until next year in order to claim the credit. This credit will be on the books through 2017 so you can use it in 2010 and beyond if you don’t get your project done next year.

One of the challenges for the alternative energy market is financing, and tax policies can make or break projects. Trying to determine long-term cash flows with unpredictable tax policies makes the challenge even harder so it is good news that many existing energy tax breaks have been extended:

  • Coal and wind energy credits as well as the biodiesel credit have been extended through 2009.
  • Energy credits for biomass and landfills lapse after 2010, as will a new credit for energy from waves and tides.
  • The 30% solar energy and fuel cell credits however get a long-term extension through 2016. 
  • The residential solar credit also lasts through 2016, and the $2,000 cap is repealed. 
  • The law that allows commercial realty to expense energy saving improvements will run through 2013.

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