If you made any energy efficient improvements in the last year, this tax season may be your last opportunity to take advantage of federal tax credits. A number of federal tax credits expired on December 31, 2013, making this year the last tax filing season to take advantage of government incentives for efficiency.
One of these tax breaks was the Residential Energy Efficient Tax Credit, which allowed consumers to receive a credit of up to $500 for installing energy-efficient products such as windows, roofs, air conditioners, water heaters or furnaces. If you installed one of these products before 2013 and haven't already used the tax credit, plan to do so when you file your 2013 taxes.
If you purchased some kind of fueling station for your alternative vehicle before 2013, this could be your final opportunity to take advantage of a federal tax credit. Residential consumers who purchased fueling equipment for natural gas, electricity, propane, E85 or diesel fuel blends between 2006 and 2014 qualify for a tax credit of up to $1,000. Fortunately for those who have not yet sprung for an eco-friendly car, you can still get up to a $7,500 tax credit for certain electric and plug-in hybrid vehicles until 2014.
Although residential consumers will see a decline in government incentives for efficiency, the commercial and industrial sectors will probably be hit the hardest. They will no longer be eligible for tax credits from renewable energy generation. Under the Renewable Electricity Production Tax Credit, which expired at the end of 2013, companies could receive 2.3 cents per kilowatt hour of renewable energy generation.
Most companies will continue to get money back for their endeavors, at least for a while. You see, the credit was set up to continue throughout the first 10 years of production. So any wind farm or solar site that began production in 2013 will still get the credit for the next decade. However, many believe eliminating this credit will stunt the growth of the renewable energy sector now and in the future.
Is this really the end of efficiency tax credits?
The answer really depends on who you ask. Some people believe these tax credits have been extended too much already, while others think that the credits are too valuable for homeowners and businesses to get rid of. Those in favor of the credits are optimistic that Congress will extend them again before the end of the year.
That assumption may not be too far off base, because this isn't the first time these tax credits have expired. Most recently, they expired in 2011 and Congress did not extend them until a year later. But even then, the extension only guaranteed the credits through the end of 2013.
Some believe reduced government revenue is the cause for the short extension period and a good reason to do away with the credits altogether. That short two-year extension trimmed $76 billion in revenue from the government's bottom line, according to the Joint Committee on Taxation. Making the credits permanent could add as much as $400 billion to the federal deficit in the next decade.
We'll just have to wait and see what Congress decides to do in the next year. Until then, make sure you're taking advantage of any tax credits you qualified for in 2013.