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What: The Tax Code has long been used to help achieve a variety of societal goals, one of which is the more efficient use of energy by individuals and businesses. It has also long been used to promote energy production, to help achieve energy independence, and more recently to promote the production of renewable and clean energy. These tax provisions change frequently to try to keep up with the latest technology and encourage individuals and businesses to make their homes, vehicles and businesses more energy efficient while encouraging the energy industry to address various specific aspects of the economy. energy production. The current administration also proposes to orient the Tax Code towards a greater concentration on the promotion of clean and renewable energies.
Why: With the large number of energy-related tax provisions in the General Tax Code, the highly technical nature of some of the requirements to benefit from the various energy-related tax advantages and the constant changes made to the General Tax Code with significant changes. new, amended and expiring energy-related tax provisions, it is important that taxpayers and their tax advisers keep abreast of these changes.
Energy provisions for individual taxpayers
- Property tax credit for non-professional energy. A lifetime credit of $ 500 for 10% of the cost of energy efficiency upgrades to primary residence building envelope components and for 100% of the cost of qualifying residential energy properties, currently expiring at the end of 2021
- Energy-efficient residential real estate loan. A 26% credit for 2021 and 2022 for the cost of certain installations in a residence, including solar water heaters, solar electric systems, small wind properties, ground source heat pumps and biofuel properties, gradually shifting at 22% in 2023, then expiring
- Fuel cell motor vehicle credit. Available for personal and business use vehicles, currently expiring after 2021
- Rechargeable electric drive motor vehicle credit. A maximum credit of $ 7,500 for personal or commercial vehicles, currently already eliminated for Tesla and GM vehicles; a credit of up to $ 2,500 also available for plug-in two-wheeled vehicles
- Real estate loan for the refueling of alternative fuel vehicles. A 30 percent credit up to a maximum of $ 1,000 for personal-use property or $ 30,000 for depreciable property, currently expiring at the end of 2021
Energy provisions for commercial taxpayers
- Energy Credit. A 10% credit for heating and electricity systems, microturbines, geothermal heat pumps and other geothermal equipment; 26% credit in 2021 and 2022 for fuel cells, solar energy with optical fiber, solar electric energy, small wind energy and energy recovery from waste
- Research Credit. A 20 percent credit for energy research consortium expenses; the current Administration is considering an increase
- Fossil energy credits. Some current credits related to fossil fuels, such as the credit for improved oil recovery and the credit for the production of oil from marginal wells, as well as the deduction for the intangible costs of drilling and developing oil wells and gas and certain coal related provisions; can be abandoned under the current proposals of the Administration
- Advanced energy project credit. 30% credit for manufacturing facilities to produce energy efficient technologies
- Carbon monoxide sequestration credit. Expanded from carbon dioxide from 2018; can be further expanded under the current Administration’s proposals to make it a direct payment rather than a credit
- Other professional tax credits. Some other tax credits also focus on specific types of energy, such as biodiesel, biofuels, nuclear power, energy efficient homes, and renewable electricity.
Which: Tax Expert Mark Luscombe, JD, LL.M, CPA, Senior Federal Tax Analyst at Wolters Kluwer Taxation and Accounting, can help discuss current energy tax breaks as well as proposed changes.
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Contact: To arrange an interview with Mark Luscombe or other federal and state tax experts at Wolters Kluwer Tax & Accounting on this or any other tax topic, please contact Bart Lipinski.