Will my Eco Home be a go-go during tax season?

Q: Are there tax deductions available for the installation of eco-friendly systems or purchase of an eco-friendly home in Europe, Germany, Asia, the U.S., or other places?

A: It varies widely depending on where you are in the world. Some countries, Singapore, Costa Rica, and Vietnam, for example, don’t offer any incentives or tax deductions for making green home improvements or buying eco-friendly homes.

Let’s look at the policies in a few countries:

Germany

A German corporate law firm states that “There are no explicit tax deductions for eco-friendly houses/installations in Germany, ...there are subsidies (e.g. for heating renovations) or individual condition credits for particular energy efficiency measures.” These subsidies vary as they are set by the state, or Bundesland, not the country itself.

Germany’s promotional bank, Kreditanstalt für Wiederaufbau, offers exceptional condition credits as an incentive for redeveloping or building energy-efficient commercial and residential projects. These credits which max out at €50,000 per project can be in the form of either loan payments deferral for the first years, or a fixed-rate loan.

Switzerland

Like Germany, tax rules may differ in each of Switzerland’s 26 cantons. Zurich, the most populous and economically important Canton, has eco-friendly tax rules consistent with those at the federal level.

Markus Aeschbacher, partner at HMP Hartmann Müller Partners, a law firm in Zurich explains, “Priority is given to tax incentives in connection with real estate improvements. As a general rule, certain maintenance expenses for properties counted as personal assets are tax deductible.” “Investments that save energy and protect the environment are equivalent to deductible maintenance expenses,” he continues. cite: Mansion global

Savings depends on the total amount spent on energy-efficient investments such as heat insulation, appliances, and windows, Mr. Aeschbacher says. Unlike all other investments, even if the investments increase the property value, such costs are deductible.

In addition, “various incentive programs—the terms of which may vary from year to year—offer subsidies for different energy-efficiency measures (e.g., insulation of facades and roofs).”

United Kingdom

"There are no specific deductions available for the purchase of eco-friendly homes or the installation of such systems in residential property,” explains Patrick Harney, partner and head of Private Client at Forsters, a London-based law firm.

That said, under certain conditions eco-friendly homeowners can receive tax incentives for the use of small-scale renewable and low-carbon sources. According to Jeremy Robertson, Forsters’ solicitor: The “Feed-in Tariffs” (“FITs”) scheme allows homeowners to be paid for the electricity they generate from eligible systems, including the wind or hydro turbines, and solar panels. Also, electricity generated mainly for personal use is exempt from income tax on FIT payments they receive.

Besides the FIT incentives, the standard 20% “value added tax” (“VAT”) charged on most goods or services in the U.K. drops to 5% for the installation and use of certain home energy-saving products—including heat pumps, solar panels, and insulation.

United States

While many states offer their own tax incentives for eco-friendly buyers and developers, ENERGY STAR is a federal program dedicated to promoting energy savings and environment conservation through energy-efficient homes, products, and buildings. While rentals do not qualify, new construction, as well as existing homes, both primary and secondary are eligible for tax credits starting at 30% for the purchase and installation of a solar water heater or solar panels this year. This is set to drop for the tax year 2020 to 26% and decrease again in 2021 to 22%.

Additional rebates and incentives for U.S. homeowners, including those offered by utilities, can be found at energystar.gov.