Concerned about the environment? Many businesses and employers are getting on board the “green train.” If you’re among them, you may derive some tax benefits. Here are six examples:
1. Mass transit passes – Employers can urge employees to use mass transit instead of commuting to work by car. As an inducement, provide monthly transit passes as a fringe benefit. For example, your company may authorize payments on a pre-tax basis-like a 401(k) plan-or the company can foot the bill itself. For 2013, an employee can receive mass transit benefits valued up to $245 per month without owing any federal income or employment taxes (up from $240 for 2012). As the employer, you company does not owe federal employment taxes on these amounts.
Note: Some states provide additional tax benefits.
2. Carpooling and van-pooling – Similarly, an employer may encourage employees to commute back and forth work in a company-owned “commuter highway vehicle.” As with mass transit passes, the maximum tax-free monthly benefit for 2013 is $245 per employee (up from $240 in 2012). To qualify, the vehicle must seat at least six adults (not counting the driver) and at least 80 percent of the mileage must be attributable to transporting employees. Furthermore, at least half of the seating capacity (not counting the driver) must be occupied during these trips.
3. Got employees who ride a bike to work? Employers can extend to bicycle commuters a tax-free transportation fringe benefit of up to $20 a month.
4. Telecommuting – Even better, an employer may permit employees to work from home all or part of the time. This can significantly reduce the congestion on the roads. Although there is no specific telecommuting tax break on the books for employers, employees may qualify for home office deductions if it they can prove they are working from home for the convenience of their employers. Address this requirement in a formal written policy.
5. Energy-efficient buildings – Owners of commercial buildings can qualify for a special tax deduction if certain federally mandated standards are met. For qualified property, the deduction is generally equal to $1.80 per building square foot less any deductions claimed in prior years. The building must achieve at least a 50 percent energy reduction for its type of building. A partial deduction of $.60 per square foot may be available if it reduces your energy costs by at least 16.66 percent. This break is scheduled to expire at the end of 2013.
6. Energy-efficient equipment – As with other business assets, your company may qualify under Section 179 to currently deduct all or most of the cost of energy-efficient equipment placed in service during the year. You may also qualify for first-year bonus depreciation. There are limits on these depreciation tax breaks so consult with your tax adviser.
Some people don’t believe the tax code goes far enough to encourage “green behavior.” With the issue taking on such prominence today, it is possible that tax breaks for improving the environment could be expanded in the future.
Hoffman Stewart & Schmidt, P.C. provides the information in this newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.