Homebuilders can reduce their tax liability by constructing more energy efficient homes, Phil Jelsma, an attorney with Luce Forward told attendees of the Urban Land Institute's luncheon on "Green Tax Incentives" Wednesday.
Many municipalities offer cheaper permits in addition to the tax incentives and rebates for which such projects are eligible, Jelsma said.
However with new construction all but squelched by the recession, few have taken notice of such provisions.
"If we had more building going on this would actually be of interest to people," Jelsma said.
In San Diego County, builders can save 7.5 percent on building permits and plan check if their project qualifies as green, Jelsma said.
For homeowners and business owners interested in installing clean energy generation systems, the federal Investment Tax Credit offers the greatest incentive. The credit covers 30 percent of the cost of the system and installation, including any needed structural improvements, Jelsma said. However such costs have not yet been clearly identified.
"We're still awaiting guidance from the IRS as to what qualifying costs are," Jelsma said.
In the San Diego region, the most popular technologies that qualify include photovoltaic solar panels and solar hot water systems.
Owners of wind power systems can alternatively choose to receive the Production Tax Credit, receiving a credit of $2.10 per kilowatt hour produced. In many cases the Production Tax Credit is more lucrative than the Investment Tax Credit, Jelsma said.
In many cases, owners can apply to receive their Investment Tax Credit in the form of a cash grant, which can greatly offset the cost of energy efficiency improvements.
In addition to federal tax incentives, the state of California and many utilities offer additional incentives and rebates. The California Solar Rebate Program offers $2.50 per kilowatt for residential and commercial solar energy systems and $3.25 per kilowatt for government agencies and nonprofits. Utilities also offer rebate programs for Energy Star appliances such as tankless water heaters -- which are eligible for up to a $200 rebate
Solar contractors typically include such tax credit rebates in the price they quote to their customers, Jelsma said.
When it comes to building efficiency, homeowners can receive tax credits of 30 percent of the cost of installing windows, doors, insulation, water heaters, electric heat pumps and central air conditioners with very high efficiency ratings. The tax credit is capped at $1,500.
Homeowners also are eligible for property tax exemptions if energy generation systems and energy efficiency upgrades significantly increases property value, Jelsma said.
The Obama administration appears to have "every intention" of extending such tax credits, which are likely to expire before many are able to take advantage of them, Jelsma said.
The administration has made significant changes to tax law, Jelsma said. The biggest changes in the works include instating the death tax and eliminating capital gains taxes on small businesses with less than $10 million in capital.
The administration also plans to change income tax requirements. Those earning more than $200,000 for a single filing and $400,000 for a married couple will be taxed at a rate of 20 percent.
Jelsma has also been paying close attention to the proposed cap-and-trade tax -- which aims to reduce emissions by requiring greenhouse gas producers to trade for carbon credits. After witnessing the failure of the tax in Europe he has "seen the wind come out of the sails on the cap-and trade proposal," he said.
It is more likely that the U.S. will institute a "carbon-based tax," under which businesses are taxed based on the emissions they produce, Jelsma said.
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