When building a portfolio for your investments, do you consider what the companies you invest in stand for? At Vertex Wealth, ecological factors are taken into account when helping clients make sound investments that are also socially and ecologically conscious. Kirk G. Kaprelian, CFP, ChFC, private wealth adviser, explains how to create the ideal portfolio to accomplish these goals.
Describe the best ways to achieve eco-friendly investing.
Values-based investing can take a few different forms: 1. Environmental, social and governance (ESG): an attempt to deliver strong risk-adjusted returns by targeting companies with such characteristics as best-in-class technology and management teams, with environmentally conscious efforts to utilize alternative fuels. 2. Values-based investing, also referred to as socially responsible investing (SRI), or faith-based investing, use screens to avoid investing in certain targeted areas. 3. Impact-investing, which can be attractive for those seeking to generate measurable environmental or social impact such as avoidance of fossil fuel-extracting companies or a focus on social objectives to promote gender equality and LGBT rights.
How can Vertex Wealth assist with eco-friendly investing?
Since there is growing interest in this area of investing, we at Vertex Wealth Advisors, a private wealth advisory practice of Ameriprise Financial Services Inc., have developed screens of our own to derive a portfolio that incorporates factors of Sustainable, Responsible Investing (SRI). We typically utilize individual securities, ETFs and mutual funds.
ESG focuses on finding companies that are best-in-class relative to competitors within their industries, such as using environmentally conscious methods for oil and gas extraction. The theory is that if a company exercises sound environmental stewardship, it is less likely to incur fines and cleanup costs, while causing less water pollution, enjoying lowering energy usage costs vs. competitors, etc.
In impact investing, the primary purpose is to make an impact either socially or environmentally, in such areas as low emissions or public transportation. It also involves a screening process, to avoid companies with businesses or practices considered undesirable per the investment company’s mandate.
What are the tax benefits of solar power, hybrid cars or other eco-friendly purchases that are trending right now?
We often receive questions regarding clean energy products (mainly vehicles and solar panels) and the tax impact thereof.
The Federal Incentive applies to all plug-in electric drive and plug-in hybrids with certain specifications such as battery size and vehicle weight limits. It amounts to a $7,500 tax credit (certain hybrid plug-ins like the Toyota Prius Prime only qualify for a $4,502 credit). But each manufacturer is allocated 200,000 eligible vehicles. That credit is reduced as each manufacturer sells more. Be aware that the tax credit cannot be more than the total federal tax owed for that year. You will also receive a $75 state tax credit for the installation of EV charging outlets.
Arizona Solar tax credits include:
1. The residential Arizona solar tax credit reimburses you for 25 percent of the cost of the solar panels up to $1,000. You would also pay no state sales tax on the equipment purchase.
2. You would also receive a Federal Solar Renewable Energy tax credit. This would amount to 30 percent of the total cost of the system when purchased. It will be taken as a tax credit against your federal income tax. It is capped at $1,000 per kilowatt of power capacity. You will need to complete the IRS form 5695 and then enter the credit on your 1040 form.
Most homeowners may see an increase in their home value after installing solar panels.
Please note that the above-mentioned information is intended for educational purposes only, and is not intended to constitute tax advice. Vertex Wealth Advisors does not provide tax advice and recommends that you consult a qualified tax adviser to discuss these strategies in further detail, to help determine whether they may be appropriate for your particular situation.