How to Save Tax Dollars by "Going Green" - The tax payoff for environmental consciousness
The latest trend in the business sector has less to do with profitability and more to do with accountability. It is all about taking steps to protect the environment. Fortunately, there are a number of ways that employers and employees can implement environmentally friendly changes while saving taxes and money in the long run. Here are several areas for your consideration.
Tax-free commuting: The tax code allows employers to provide tax-free payments or reimbursements to employees for certain commuting expenses. For instance, an employee may currently receive mass transit benefits of up to $115 per month. Similarly, employees can benefit from carpooling or vanpooling in a qualified company-owned vehicle. The maximum tax-free monthly benefit for this tax break is $115 per employee. Both of these fringe benefit amounts are adjusted for inflation on an annual basis.
Alternative motor vehicle credits: Business taxpayers may qualify for a special tax credit for acquiring a vehicle that meets specified requirements. This includes the use of hybrid vehicles. The amount of the hybrid-vehicle credit, which ranges according to the vehicle's fuel economy, may be as high as $3,400. Caveat: The credit for hybrid vehicles begins to phase out when the manufacturer has sold more than 60,000 vehicles.
Home-office deductions: Instead of having employees drive to work every day, you may allow them to work from home all or part of the time. This generally reduces your company's overhead expenses. Furthermore, an employee may qualify for home-office deductions if he or she can establish that the arrangement is required for the employer's convenience. The optimal means is to spell out the requirements for stay-at-home employees in writing.
Energy-tax deductions: Under the energy-tax law passed back in 2005, the owner of a commercial building may claim a deduction for certain energy-saving improvements. This tax break, currently scheduled to expire after this year, is available for improvements that achieve a 50% energy reduction for a targeted type of building. The deduction is equal to $1.80 per building square foot, although you may qualify for a lesser deduction of $0.60 per square foot under certain circumstances.
Hazardous site deductions: Normally, environmental cleanup costs must be capitalized and added to basis. But there is a special exception for the cleanup of hazardous materials located at qualified sites. A business may be able to claim a current deduction for qualified expenses. As the law stands now, the deduction is limited to expenses paid or incurred before 2008, but this tax break may be extended by subsequent legislation.
Finally, there is no other "official" deduction or credit for buying other energy-efficient property. However, that does not mean you cannot derive tax benefits for such purchases. For example, if qualified assets are placed in service in 2008, they are eligible for both the enhanced Section 179 deduction, the 50% bonus depreciation and the regular Modified Accelerated Cost Recovery System (MACRS) deductions. The maximum Section 179 deduction for this year is $250,000.
To investigate the opportunities available for a particular business, contact a professional tax adviser.