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Let Uncle Sam Pick Up the Tab for Your Green Lifestyle

Want to keep the planet and your portfolio green? The Fool shows you how in our special series on Earth-friendly investing.

What could be better than saving on energy costs by making energy-efficient improvements to your home? Getting Uncle Sam to pay for it.

To give taxpayers an added bonus for investing in green home improvements, governments at both the state and federal levels have provided a range of tax incentives. Unfortunately, some tax breaks expired at the end of 2007, but there are still many ways you can save on taxes by going green.

Tax credits you might have missed
A host of tax credits designed to encourage home improvement projects expired last year. These included window and door replacements, metal roofing, insulation, energy-efficient heating and cooling systems, and water heaters. Put together, credits up to $500 could be used to offset the costs of these improvements.

Although these credits are no longer available, the House passed a bill earlier this year -- H.R. 5351 -- to extend these and other energy-related tax incentives. Currently, the Senate hasn't yet considered the bill, but there's a chance that these popular credits will be back.

Other green incentives
Meanwhile, there are other tax incentives that didn't expire. You can still claim a tax credit of up to $3,000 for certain hybrid vehicles, including those made by Ford (NYSE: F  ) , General Motors (NYSE: GM  ) , and Honda (NYSE: HMC  ) . However, these credits have limited availability -- Toyota (NYSE: TM  ) vehicles, for instance, have already used up the credits allocated to them.

In addition, you can still earn a credit for solar energy systems. The credit amounts to 30% of costs up to a maximum of $2,000. As of now, this credit is set to expire at the end of 2008, however, so you won't want to wait to get started with a system.

There is hope for the future, however. With the success that First Solar (Nasdaq: FSLR  ) , Evergreen Solar (Nasdaq: ESLR  ) , and numerous private wind energy companies have had, there's support to extend expiring credits -- both for major corporate projects and for personal investments.

In the meantime, it's definitely worth it to stay alert to credits available in your area. With many states adding incentives of their own, energy-efficient improvements can pay for themselves more quickly than ever before. With today's high energy prices, finding savings is more important than ever.


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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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