If you're the type who recycles your aluminum cans, reuses your plastic sandwich bags, and composts your vegetable scraps in the name of environmental friendliness, then Uncle Sam might have a couple of goodies for you.
The tax code offers a bunch of incentives encouraging people to make energy-saving purchases when shopping for vehicles and improving their homes.
Jim Press, the president of Toyota North America, a division of Toyota Motor (NYSE: TM), urged lawmakers recently to make one of those incentives even bigger. This summer, Toyota reached the production limit imposed on hybrid cars available for a pretty sizable tax credit for the consumers who buy them.
When the carmaker hit the 60,000-vehicle limit, the tax credit for Toyota hybrids started to fall. In the first step toward its gradual elimination, the $3,150 credit for the popular Toyota Prius fell to $1,575 on Oct. 1. The change also took a bite out of Toyota's hybrid sales in October, Press told the Electric Drive Transportation Association.
Press, and probably a lot of prospective Toyota purchasers, want to see that production limit lifted. (So does President Bush, by the way, but Congress hasn't done anything about it.) In the meantime, environmentally conscious consumers still have a wide range of tax breaks at their disposal. If you're gearing up to make a green purchase, buying before the end of the year could mean some savings on this year's tax bill.
If you're in the market for a hybrid car but disappointed about the reductions in tax credits available for Toyotas, you can still claim the full credit for other cars, trucks, and SUVs. The IRS keeps a handy list of vehicles that qualify and the size of the available credit. Vehicles made by Honda (NYSE: HMC), Ford (NYSE: F), and General Motors (NYSE: GM) still qualify. Their hybrid sales have lagged the more popular Toyota models.
Vehicles aren't the only environmentally friendly purchases that put a little green back in your wallet. You can also get tax credits for certain home improvements, including adding insulation, energy-efficient windows, and certain heating and cooling equipment. Most of these tax credits expire at the end of next year.
Among them:
- Claim a credit worth 10% of your cost, up to $200, for installing energy-efficient exterior windows, skylights, and storm windows.
- Claim 10% of your cost, up to $500, for installing energy-efficient exterior doors. The same incentive is available for adding storm doors.
- Claim 10% of your cost, up to $500, for a qualified metal roof.
- Claim 10% of your cost, up to $500, for adding insulation that's expected to last at least five years.
- Claim $300 for qualified central air conditioning, heat pumps, or geothermal heat pumps. Claim up to $150 for a qualified gas, oil, or propane furnace or hot water boiler.
- Claim $300 for a qualified gas, oil, propane, or electric heat pump water heater.
- Claim a tax credit of up to $2,000 for solar water heating and photovoltaic systems.
None of these tax credits are huge, but it's still money in your bank account. If you've made any of these changes already this year, you're in the perfect position to claim one or more of these credits. Your total for home improvements, unfortunately, cannot exceed $500. More details and the fine print can be found at the Energy Star website and at the IRS.
Related taxing topics:
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Fool contributor Mary Dalrymple wishes her car would run on recycled cans and vegetable scraps. She does not own stock in any company mentioned in this article, and she welcomes your feedback.
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