I am retired and take educated guesses on all things financial.

August 28, 2009

August 28. 2009: Tax Credit Schemes For Green, Both Ways

Tax Credits for a greener America are in fashion. In each case, we may as well admit up front that these type of programs amount to taking money from all taxpayers to fund pet environmental whimsy of the environmental crowd. The State of Florida, amongst others, had rebate programs to save the planet in place until it ran out of money. The solution? Use federal stimulus money to front it. Astute investors and consumers will take advantage of these programs to a certain degree, hopefully after reading the fine print (such as the up to $4500 of TAXABLE income that was credited to those who transacted in the recent vehicle "clunker" program).

The Miami Herald recently ran a story highlighting several of these programs.

So your car isn't a clunker? And you're not a first-time new home buyer? Maybe your air conditioner is a on it's last legs.

The price for a new Ruud air conditioner is, say, $6295.00. Because of a combination of a rebate from Florida Power and Light, the manufacturer and a $1500.00 credit on his taxes next year means the cost will be $3520. Any air conditioner that qualifies as an Energy Star appliance will qualify for these incentives, in Florida and in other states proffering similar programs.

Federal stimulus laws allow home buyers to receive a tax credit of 30% of the cost of energy efficient windows, water heaters, air conditioners and furnaces, up to a maximum of $1500.00. If you max out your credit this year, you can buy a qualifying item and claim the credit again next year so long as the item is installed by December 31, 2010.

Another tax credit allows homeowners to get up to 30% of the cost of solar energy systems, such as a solar water heater and solar power, small wind systems and geothermal heat pumps if they are installed by December 31, 2016. It's a separate credit from windows, air conditioners, etc., so homeowners can use them both. And there is no cap on the amount of this credit. One fellow from Miami Shores, FL spent $54000.00 to install solar panels and a battery back-up system for his home. He received about $20000.00 from a state solar energy rebate program and will receive a further $10200.00 as a credit on his taxes.

Water heaters are also a hot item because water heaters might also qualify for more money back than just the tax credit.In Florida, a natural tankless water that costs between $1600-$2000.00 would net a $450.00 rebate from the gas company TECO and a 30%tax credit on the purchase price.

A rather obscure tax break allows businesses to claim a bigger deduction for new equipment such as furniture. Land, buildings and items like a new central air conditioner don't count. Section 179 of the tax code, around for a while, doubled the amount deductible to a maximum of $250000. and the 2009 law extended the deductions through the end of 2010. Businesses can claim the entire deduction each year, according to the IRS.

More? Absolutely. Upcoming for everyone is the cash for "clunker" appliances which are rebates to buyers for the right kinds of dishwashers, washing machines, refrigerators, dryers, air conditioners and other items.

What companies may see a rise in their stock price as a result of these type of programs? Here are a few well-worn and new names that will not only sell product or merchandise, but have good fundamentals as well:

Broadwind Energy (BWEN) $7.72/$746m market cap

Helix Wind (HLX) $2.86/$110m market cap

Whirpool (WHR) $65.05/$4.6b market cap/2.67% yield

Herman Miller (MLHR) $16.15/$920m market cap/0.53% yield

Steelcase (SCS) $6.42/$853m market cap/2.38% yield

HNI (HNI) $21.44/$968m market cap/3.27% yield

Home Depot (HD) $27.65/$47B market cap/3.89% yield

First Solar (FSLR) $125.00/$10.7b market cap (beware solar stocks=price war coming)

Lowe's (LOW)$21.67/$32b market cap/1.66% yield

Rinnai (RINIF) $46.75/$2.5b market cap (pink sheets, but a great energy-saving appliance company)