Sustainable tax breaks
The legislative push for renewable energy incentives
I try my best to live according to my beliefs and help the environment. I turn off all the lights before leaving my house. I shop at my local farmers’ market and bring my own bag. I am thinking of buying an electric vehicle and reduce my carbon imprint. But being green can get expensive. How do I balance my beliefs with my desire to live a relatively non-deprived yet stylish (and economical) lifestyle? Maybe the government could help me out a little bit? With tax breaks for example that promote a greener, more sustainable way of life.
Actually, tax incentives for various renewable and clean energy sources and technologies could see an additional boost from Congress in the coming months. The US House of Representatives Committee on Ways and Means has recently reintroduced the Growing Renewable Energy and Efficiency Now (GREEN) Act, which aims to extend tax credits for renewable energy and carbon capture projects. If passed, the GREEN Act would build upon and boost the extended tax benefits to renewables that Congress passed in the stimulus package at the end of 2020.
Although mostly geared towards large infrastructure projects, the original GREEN Act included some very interesting individual incentives for homeowners, commercial building owners, and electric vehicle buyers. For homeowners upgrading their residences, installing energy-efficient items such as windows, specific furnaces or boilers, and exterior doors would continue to be eligible for the section 25C nonbusiness energy property credit through 2024. The proposal generally expands the credit, but it disallows roofs and advanced main air circulating fans from qualifying.
Credit for solar electric
The changes to section 25D’s credit for solar electric, solar water heating, fuel cell, small wind energy, and geothermal heat pump expenditures would include an extension of the full 30 percent credit through 2024, with a phaseout through 2026. Battery storage and biomass fuel property would be added.
Electric vehicles (EVs) get a boost, too. The threshold sales numbers for the qualified plug-in electric drive motor vehicle credit in section 30D would be raised from 200,000 to 600,000, but the credit would be reduced by $500 after the manufacturer hits the 200,000 mark. For the first time, buyers of used EVs would be allowed to claim a credit, which is capped at the lesser of $2,500 or 30% of the sale price. This change might end up working to the benefit of used car dealers because only sales from a dealership count.
There’s an income-based phaseout of the credit that starts at adjusted gross incomes of $30,000 and ends at $40,000 ($60,000 and $70,000, respectively, for married couples filing jointly). That’s somewhat difficult to reconcile with the existing and expanded section 30D credit for new vehicles, in which there’s no income phaseout, and plenty of evidence suggests that it largely accrues to households with incomes much higher than the U.S. median.
The drafters of the GREEN Act evidently believe that taxpayers with incomes over $40,000 or combined household incomes of more than $70,000 are supposed to buy new vehicles. The income limitation is probably designed to address the criticism that the EV credit is used almost entirely by wealthier taxpayers, but it doesn’t fix that problem — as an income limit on the credit for new vehicles would’ve — and it could make buying a used EV a little more expensive. But in the end, I would consider this only a minor detail.
By the way: The Committee on Ways and Means is not the only legislative body pushing for renewable energy incentives. The US Senate Committee on Finance is also gearing up to put forth its own proposals to enhance renewable energy efforts, signaling that climate change is an important issue not only to the Biden-Harris administration but to Congress as well. As Congress continues to advance legislation surrounding clean energy, the renewable energy sector will likely continue to see increased support. And hopefully enable me to lead a more responsible, sustainable, and green lifestyle that I aspire to.