Looking for a way to green your home without spending a lot of green? The government may be able to help. The American Recovery and Reinvestment Act (ARRA) of 2009 provides tax incentives for home and business owners to undertake a number of eco-conscious renovations.
One of these incentives is a tax credit for money spent installing a wind energy system. In addition to the tax incentive, you’ll also save on energy costs in the long run.
Americans who want to save money, energy and the Earth should rejoice over this opportunity. But how exactly do “wind credits” work? Laws are notoriously complex, and tax codes are no exception. Here’s a helpful walkthrough on what you need to know to tap into wind energy while saving money and the planet.
Cutting through red tape: How wind credits work
Portions of the ARRA are extensions of the 2005 Energy Policy Act. a piece of legislation that offered a series of “consumer tax incentives” designed to encourage energy conservation at home and in businesses. A tax incentive essentially acts like a partial deduction for expenditures: When you itemize purchases on your federal income tax form, certain items are eligible for reduced tax payments.
Included in these items are household and commercial wind turbines. You can get tax credit in one of two ways:
First, the Production Tax Credit saves you 2.1 cents per kilowatt-hour generated by “utility-scale wind turbines.” These turbines are capable of producing enough energy for a community, rather than just one household.
Second, you can qualify for an Investment Tax Credit (ITC), which helps offset the cost of installing “small wind turbines for home, farm or business.” This is the credit most home and business owners will want to look into.
The ITC gives you a credit of 30 percent of the total cost of the system, providing it has a
capacity of 100 kilowatts or less and is installed before Dec. 31, 2016. After the passage of the ARRA last year, the credit value is now uncapped, meaning you can install a wind energy system (within the parameters above) of any cost and still get the credit.
How do you apply for this credit? Simple: By following the guidelines above, and claiming the purchase on your taxes. you can qualify for the incentive. Be sure to keep your receipts and the “Manufacturer’s Certification Statement” (“a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit”); though you don’t need to submit them with your taxes, you’ll need to have copies for your records.
Terms for taxes
That’s a lot of information for anyone to absorb, so let’s run through some important definitions:
A kilowatt-hour is the unit used by utility companies to measure energy consumption. The watt is the most basic measure of electrical power; 1,000 watts flowing over the course of an hour constitutes a kilowatt-hour. For a simple reference. a 100-watt light bulb requires one kilowatt-hour to run for 10 hours.
Determining your energy consumption involves using an electricity monitor to determine how many kilowatt-hours you use in a given amount of time. It can be especially illuminating to compare your energy use while “on the grid” to how much you use with an eco-conscious power supply.
Shopping for a wind turbine system might seem daunting, especially because the technology has only become recently widespread. Thankfully, the American Wind Energy Association has compiled a list of companies recognized as leading wind technology installation specialists, as well as a range of questions buyers might find helpful.
Also, bear in mind that this is just an introduction to the tax laws governing wind energy incentives; be sure to consult an accountant or other reliable sources to fill in the details.