Tax Refund


Earth Day 2023 is April 22, and this year’s theme is Invest in Our Planet.

Taxes may not be the first thought when you think about the environment, but it’s important to highlight the benefits of some environmental taxes and credits such as gasoline tax by state or the nonbusiness energy property credit.

One way we can approach climate action is by reducing our carbon footprints. We thought it would be timely to see if there is a correlation between the gasoline tax rate by state and our carbon footprint by state, as well as explore what environmental choices we can make for our home lives in recognition of Earth Day 2023.

States With The Highest Gasoline Taxes

Gasoline taxes vary widely from state to state, as well as the variance between per-gallon prices in different areas. 

Here are the ten states with the highest gas taxes (combining both the 18.4 cents per gallon federal tax and the individual state and other taxes) in 2022:

  • California: 86.55 cents/gal
  • Illinois: 78.00 cents/gal
  • Pennsylvania: 77.10 cents/gal
  • Hawaii: 48.25 cents/gal
  • New Jersey: 69.10 cents/gal 
  • Nevada: 68.88 cents/gal
  • Indiana: 68.19 cents/gal
  • Washington:  67.80 cents/gal
  • New York: 66.62 cents/gal
  • Michigan: 63.57 cents/gal

States With The Lowest Gasoline Taxes

Here are the ten states with the lowest cumulative gasoline prices:

  • Alaska: 33.53 cents/gal 
  • Mississippi: 37.19 cents/gal 
  • New Mexico: 37.28 cents/gal 
  • Arizona: 37.40 cents/gal 
  • Missouri: 38.32 cents/gal 
  • Oklahoma: 38.40 cents/gal 
  • Texas: 38.40 cents/gal 
  • Louisiana:  38.41 cents/gal 
  • Colorado: 40.40 cents/gal 
  • North Dakota: 41.40 cents/gal  

Most Cumulative Emissions

Citizens and environmental scholars often wonder if high gasoline taxes actually discourage driving and make a visible dent in a state’s carbon footprint. Evidence is inconclusive, but we can look to the states with the highest and lowest cumulative emissions for clues.

According to the U.S. Energy Information Administration, the following ten states had the most energy-related carbon dioxide emissions (as of 2016): Texas, California, Florida, Pennsylvania, Louisiana, Ohio, Illinois, Indiana, New York, Michigan.

Lowest Cumulative Emissions

The same study identified the following ten states as having the lowest emissions: District of Columbia, Vermont, Rhode Island, Delaware, New Hampshire, South Dakota, Maine, Idaho, Hawaii, Montana.

While 60 percent of the states with the highest gasoline tax also appear on the list for most cumulative emissions, none of the states with the lowest gasoline tax appear on the list with the lowest cumulative emissions. Given these results, it’s hard to conclude that there is a direct correlation between gasoline taxes and carbon footprints. Moreover, gasoline tax revenues are not idealistically set aside for transport purposes but rather spent broadly across state needs.

Electric Cars and Credits

There’s good news if you’ve purchased a new, qualified plug-in electric vehicle or a fuel cell electric vehicle (FCV). The good news is in the amount of up to a $7,500 tax credit. Meaning that when you drive green, the IRS wants to give you back some green. Under the Inflation Reduction Act, the Clean Vehicle Credit covers new electric vehicles but has also been expanded to people who purchase used electric vehicles up to $4,000. And although golf carts and go-karts are fun, these credits won’t cover those types of vehicles. 

The amount of credit for new vehicles will depend on when you placed the vehicle in service (when you took delivery of the vehicle) regardless of the purchase date. Both new and used vehicles must meet certain criteria to qualify. 

If you take possession of a new clean vehicle on or after April 18, 2023, it must meet critical mineral and battery component requirements to qualify for the credit. This applies even if you bought the vehicle before April 18. 

Eligibility for taking the clean vehicle credit also depends on your modified adjusted gross income (AGI) and the manufacturer’s suggested retail price (MSRP) for new vehicles and sales price for used vehicles.A credit of up to $7,500 or up to $4,000 can mean huge tax savings, especially since tax credits save you dollar for dollar on your taxes.

For a full list of requirements, you can visit the IRS index to manufacturers webpage.

Incentives for Energy Efficiency in Your Home

We all know that turning off the lights when you leave a room can add up to big savings on your electric bill and keeping a pulse on the thermostat during the summer and winter months can also make a large impact.

But, let’s think bigger! It might be time to consider renewable home energy systems as your next step in living a more earth-conscious lifestyle — nothing says green like renewable energy! And thanks to Uncle Sam, you can save plenty of green with some hefty energy-efficient tax incentives for your home as well.

Nonbusiness Energy Property Credit

The Non-Business Energy Property Credit, has now been renamed to the Energy Efficient Home Improvement Credit.    As a result of the Inflation Reduction Act, the credit is now worth up to $1,200 per year for a qualifying property placed in service on or after January 1, 2023 and before January 1, 2033.

If you made energy-efficient improvements to your home (including the addition of energy-saving roofs, windows, skylights, doors, etc.) through December 31, 2022 , you could to claim the non-business energy property credit for 10 percent of amounts paid for qualified energy efficiency improvements up to a lifetime cap of $500 on your 2022 tax return. 

Since the credit now has an annual limit (generally up to $1,200) rather than a lifetime limit, you could spread your home improvements over the current 10-year life of the credit and receive $12,000 in tax benefits. If you make qualified investments in heat pumps and biomass stoves and boilers, you could also receive up to an additional $2,000 per year.

Residential Energy Efficient Property Credit

If you installed residential solar energy systems, solar fuel cells, and wind turbine systems in your home  from January 1, 2022 through December 31, 2032, you may be able to take the Residential Energy Efficient Property Credit which is worth up to 30% of the cost for your renewable energy improvements. Property placed in service from January 1, 2033 to December 31, 2034 may be able to receive a reduced percentage rate. The credit percentage rate phases down to 26 percent for property placed in service in 2033, 22 percent for property placed in service in 2034.

In addition to environmental taxes and credits, there are a few lifestyle choices we can make now to make our homes more environmentally conscious:

Start a Home Garden to Reduce Waste

The great news is that pretty much everybody can have a garden (even if you think you have a black thumb).

The key is knowing your garden spot and your skill level. Container gardens are a fantastic way to start as you have a lot of control over the soil. And if you’ve never gardened before, choose easy to maintain plants like herbs and peppers.

If you really want to expand, set aside a spot in your front or back yard and prep this week after work. You can then grab some seedlings and plant them this weekend. If you are more ambitious, you can start with seeds indoors and then transplant them when they are stronger and can resist pests.

Gardens are not only a fun way to relax, but they can save you some money in the long run. Rather than buying bags of mixed greens every week, you can pick exactly what you need minutes before you eat and you’ll also avoid the food waste that can come with all those plastic bags from the grocery store!

Composting: Reuse Your Kitchen Scraps

Want to make your veggie garden really shine? How do you find fantastic organic material to feed your plants and build up your soil?

Create your own rich compost by saving your kitchen scraps (minus dairy and meat) and start a compost pile or bin outside in the backyard. If you’re limited on space due to apartment or condo living, you can still create a micro one right under your sink!

When you mix the scraps with coffee grinds, you can develop some fantastic material. Keep in mind that a healthy compost pile will have a nice earthy smell as it breaks down. Not only do you reduce waste by creating your own compost pile, but you can also garner big savings by not having to buy pricier organic fertilizer and soil builders at the store.

Recycle

Speaking of kitchen scraps, since you’re already going green and reducing waste by composting, reduce your trash even further by recycling. Stash away those bottles, cartons, and boxes (we all know you have them) for recycling instead of tossing them into the garbage bin.

Recycling may have been a harder habit to adopt at first, but it’s now become second nature to us. It’s now not unusual for garbage bins to take close to three weeks to fill, compared to a weekly fill for recycling! 

Even though we cannot celebrate the Earth outside in large groups this year, there are many creative ways we can go green and show our appreciation and respect for the environment while also saving money!

TurboTax Has You Covered

Don’t worry about knowing these tax rules. Meet with a TurboTax Full Service expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.

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