Tax Deductions Available for Eco-Friendly Homes

Constructing eco-friendly homes will help you reduce the amount of money paid in taxes. Below are some of the ways through which you can take advantage of tax deductions for eco-friendly homes. This applies to both homeowners and commercial building owners. Construction companies also benefit from tax deductions when they build eco-friendly homes and other buildings.

Reduced depreciation rate

Homeowners who have made improvements in their homes can get up to a 1.8% depreciation deduction per square foot of the building. Though it is a one-time deduction, it is an incentive to encourage the building of eco-friendly homes. Some of the energy efficient measures one should take have been highlighted below. High-efficiency interior lighting and building envelopes top the list. Another measure homeowners can take is to improve heating and ventilation systems in the house. They should opt for more eco-friendly systems. This way, they can take advantage of federal tax deductions.

Solar investment tax credits

This is an incentive to encourage the use of renewable energy sources. Though it mainly focuses on the use of solar energy, other clean energy sources are included as well. They include:

  • Fuel cells
  • Small wind turbines
  • Geothermal systems
  • Microturbines
  • Combined heat and power systems

Though the tax deductions are almost at 30%, it is likely to decrease with time as more people embrace energy-efficient buildings. In the building and construction industry, many people have adopted these measures.  Construction companies also have adopted the trend in order to take advantage of the tax deductions.

Accelerated cost recovery system

Through this system, the businesses are able to recover their investments. The Internal Revenue Service will give commercial building owners and businesses depreciation deductions. This only applies to eligible green building property investments. Some of the features that the IRS considers include:

  • Solar applications in the building
  • Photovoltaics
  • Landfill gas
  • Municipal solid waste management
  • All other renewable energy sources installation

Remember, all qualifying energy-saving equipment buyers can take advantage of such tax deductions. The period is usually within five years. Having eco-friendly buildings helps businesses because the cost of energy is also reduced. This reduces the cost of business operations considerably.

Energy efficiency tax credits for residential homes

Homeowners who make energy efficiency improvements qualify for tax credits of up to 10% of the costs incurred. This also applies to energy efficient equipment bought by homeowners. This especially applies to energy star appliances and products. Homeowners are therefore encouraged to use such products in their homes. Construction companies should also use such products and encourage homeowners to use appliances that promote energy efficiency.

Property Assessed Clean Energy (PACE) financing

Commercial and residential property owners who make investments in renewable energy can get financing. This helps them to access and install high-cost energy efficient equipment. This makes such options affordable for property owners. Remember, the upfront financing of such high-cost equipment is availed to the property owners. The rate of interest on such financing is fixed. In addition, this form of financing is long-term. It is, therefore, an attractive source of financing for many property investors. Another advantage of such financing is that the loan repayment obligation is transferred to the new property owner when the property is sold.

Corporate tax breaks

A business that has incorporated energy efficient systems can get tax breaks from the government. The government is committed to ensuring that renewable energy resources are used. This is also likely to boost the economic growth of the country. In addition, it helps conserve existing natural resources. New homebuilders also get green tax breaks. New homes that save up to 50% in heating and lighting their homes are eligible for the tax credits.

Tax credits for recycling

This applies to businesses that buy recycling equipment. Those using recycled materials also get the tax breaks. Businesses that recycle resources also get tax breaks. There are also tax breaks for eco-friendly waste management in businesses.

These are some of the ways governments encourage stakeholders in the property industry to use eco-friendly measures in building new homes and premises. Existing homes and commercial buildings can be renovated in order to incorporate the eco-friendly upgrades. This not only helps to reduce energy costs, but also helps in conservation of the environment.