So, you want to go green but say to yourself, “This isn’t the right time. The economy is in the dumpster, should we really be spending our money on green projects when the payback is so far down the line?” Well, it may bring to mind our current political scene, where the federal government has proposed spending more today for gains tomorrow. The theory: you’ve got to look at the big picture.
And that brings us back to your greening dilemma, which is, not surprisingly, tied to the federal government’s spending plans. The $787 billion economic stimulus package, signed into law by President Barack Obama in February, is filled with tax credits and incentives for green technology. That can mean good things for condos and co-ops like yours, looking to be more environmentally friendly.
Your first stop on the Stimulus Express is the Energy Star website at www.energystar.gov. Scroll down to the section marked “Tax Credits” to see a chart outlining the options. Among the useful factoids:
You can get a 30 percent credit. If a homeowner purchases and installs certain Energy Star-rated products for projects such as windows and doors, roofing, insulation, HVAC systems, and water heaters, the tax credit is 30 percent of the project cost with a $1,500 cap. (If a building takes on multiple projects, the total cap for all projects is $1,500 per person filing taxes.)
When it comes to solar energy systems (solar water heating and photovoltaic systems) there is no cap, however, so residents can deduct 30 percent of the total cost. There is also a 30 percent tax credit with no cap for costs associated with geothermal heat pumps and microturbine systems.
There are some restrictions, however. According to Karen Schneider, Energy Star website manager, projects must be placed in service by a certain period of time (for instance, PV systems by December 31, 2016). Also, those who file taxes can’t get more back in tax credit than they paid to the federal government.
The way the tax credit works for co-ops and condos is that residents can take the deduction on their personal income taxes based on their share (if a co-op) or divided evenly among condo owners. Each individual taxpayer can take up to the $1,500 cap.
Windows and caveats. One problem is that not all improvements that qualify under Energy Star – and therefore the tax credit – apply to co-ops and condos. Take windows, for example. The products that meet the specifications for the tax credits are made of vinyl product, not acceptable to most New York City co-ops and condos.
Vinyl-framed windows are more environmentally friendly because they conduct less heat and cold than aluminum, but they are often too small for condo and co-op buildings. (Aluminum window frames are stronger and can accommodate a larger window. The maximum size for a vinyl window is about three feet wide by about four feet high.)
Green roofs. When it comes to the tax credits for roofing jobs, two of the biggest obstacles are the upfront cost and the faltering economy, says James Friedman, owner of FixaRoof by Friedmans. Green roofing, which includes layers of Energy Star-rated roofing products and vegetation, can cost up to 50 percent more than a traditional job. But the return on investment is seven to ten years and green roofs last three or four times more than traditional roofs. The tax credits are a good incentive, but it may not be enough. “It’s an all-around savings but you still have to convince board members,” Friedman says.
Solar power. For those buildings that are pursuing a solar power project, the tax breaks will be a nice bonus, notes Anthony Pereira, president and CEO of altPower, a PV installer. He adds that solar doesn’t work for everyone because many buildings are in shadow and also have limited roof space. In addition, the upfront cost makes such projects a tough sell, despite the tax breaks.
Several other elements in the stimulus package that could benefit condos and co-ops taking on solar projects are still up in the air, reports Monique Hanis, spokeswoman for the Solar Energy Industries Association.
One is a government-backed loan guarantee program. If a condo or co-op wanted to take on a solar project but had a hard time getting financing, the government might be able to back the loan, making it easier to get financing and lower points.
HVAC upgrade. Any upgrade that has to do with a HVAC project is also complicated. According to Roger Macaluso, president of Blue Water Plumbing and Heating, many Energy Star products simply can’t be installed in an older building without massive renovations.
It’s not like you can always take out that old hot water heater or oil boiler and plug in a new (tax-break-qualified) energy-efficient model. Every building is going to be different, so Macaluso says boards and managing agents need to consult with a contractor and probably a mechanical engineer, which costs money.
Commercial breaks? Another element that is still unclear deals with grants given in place of tax credits, says Hanis. Some commercial projects can take a grant that is equal to the amount they would have gotten in a tax credit to get a solar project started. It’s unclear now whether condos and co-ops would also be able to take advantage of that program.
One effect the stimulus package did have deals with projects funded by subsidized low-interest loans, such as those offered by the New York State Energy Research and Development Authority (NYSERDA). Previously, if you took a NYSERDA loan you couldn’t also get a federal tax credit. Now you can.
“Overall, we think it’s promising,” Hanis says of the tax credits in the stimulus package. “But it all depends on how the program is administered.”
The American Society of Heating Refrigeration and Air Conditioning Engineers considers any building over three stories to be a commercial building, says Colleen Hughes, spokeswoman for that trade group. And commercial buildings get tax breaks for the corporation or the owner, which doesn’t help residents.
But Stephen Beer, an accountant with Czarnowski & Beer, says even though the industry considers a condo to be a commercial building, under the tax code, residents should be able to claim the tax credits on their personal returns if they can take on a green project covered under the stimulus package.
“The intent of the tax code is to deal with condos and co-ops and to put them in the same place as if the resident owned a private house,” he says. “It can create an issue. It’s something that people should be aware of.”
Tax credit and shares. Another issue that muddies the waters concerns the tax credit and the number of shares owned by a resident, Beer says. Let’s say a board decides to take on a green project and levies an assessment to pay for it. If a shareholder has more shares than his neighbor, he will pay more of an assessment but he’ll still get the same amount in tax credit as the resident with fewer shares.
Such complications make it even more important for buildings and boards to consult with experts, he says.
“It’s important to embrace your professionals as you go into a project. It’s so complicated and requires so much research that you have to get all your professionals involved and get their two cents.”
And those two cents just might end up saving you some real money on your taxes – while advancing your green dreams as well.
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