Numerous states now offer tax incentives for using renewable energy sources. Arizona, Hawaii, Idaho, Maryland, Minnesota, Montana, New Jersey, New York and Oregon are all regions where the government offers tax benefits to individuals and businesses that opt for renewable energy resources.
In the past the private sector has not been in favor of energy-efficient practices. Despite the fact that these offer significant benefits to the public like dependable energy, economic savings and a cleaner environment there has been hesitation to implement such measures. Reasons cited include the initial cost, and the risk involved in a new technology. Offering tax incentives for using renewable energy sources can help in making the switch to cleaner fuels.
At present several U.S. states offer tax incentives for using renewable energy sources. This can help citizens, local governments, and schools cope with skyrocketing energy prices. Using energy efficiently saves money and exemptions from or reductions on tax obligations are granted to make switching to energy efficiency solutions easier and more attractive.
Tax incentives for using renewable energy sources differ from state to state. Benefits are based on making it easier to buy, install or make energy-efficient products. Because the upfront costs of installing energy efficient equipment can be high tax incentives are aimed at enabling communities to easily afford such measures. Tax credits, deductions, and allowances are granted for those who make the switch to clean energy. Green buildings tax credits and efficient appliances credits are the most commonly granted.
By offering tax incentives for using renewable energy sources the market share of the product or practice is increased and its status is raised and endorsed. This opens the market for installers, consumers, salespeople, etc. who can derive profit from the product. When this happens the cost of the energy will go down. At the point where the product becomes cost effective it will become more widely implemented.
A variety of tax incentives for using renewable energy sources are offered and include income, corporate, property, and sales tax incentives. Tax credits, allowances, and deductions are all used to encourage energy efficiency. Tax incentives may have expiration dates of between 5 and 10 years and these are often renewable. The time the incentive is available after the installation may also be limited by the state.
Income incentives offer residents income tax incentives for using renewable energy sources of between 5% and 40% from their adjusted gross income to enable them to pay for energy-efficient equipment. Current policies allow a credit or deduction of between 5% and 40% of expenses. Corporate concerns may be due credits from 10% to 35% against the price of energy-efficient equipment.
Property tax incentives for using renewable energy sources may include local property exemptions or revaluation based on the presence of energy-efficiency equipment. Sales tax incentives offer exemptions from sales tax from the cost or installation of energy efficiency equipment.
For more information on tax incentives for using renewable energy sources consult the ACEEE report Tax Credits For Energy Efficiency and Green Buildings: Opportunities for State Action (PDF 536 KB) and the NCSL State Legislative report called State Incentives for Energy Efficiency (April 2001).
