Residential Renewable Energy Tax Credits The Energy Policy Act of 2005 established a 30% tax credit up to $2,000 for the purchase and installation of residential solar electric and solar water heating property. The recently passed Emergency Economic Stabilization Act of 2008 (P.L. 110-343) included, extended and/or amended many consumer tax incentives originally introduced in the Energy Policy Act of 2005 (EPACT). What Changed? Consumers who install solar electric systems can receive a 30% tax credit for systems placed in service from January 1, 2006 through December 31, 2016; the previous tax credit cap of $2,000 no longer applies. In addition, consumers who install small wind systems can receive a tax credit.
An individual can take both a 30% credit for a photovoltaic system and a 30% credit for a solar water heating system. A 30% tax credit up to $500 per 0.5 kilowatt (kW) is also available for fuels cells. The tax credits are now extended through December 31, 2016.
Photovoltaic System Requirement Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement.
Solar Water Heating System Requirement
At least half of the energy generated by the "qualifying property" must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household.
The credit is not available for expenses for swimming pools or hot tubs.
The water must be used in the dwelling.
The system must be certified by the Solar Rating and Certification Corporation (SRCC).
The credit is calculated based on the individual?s expenditures excluding subsidized energy financing, which is defined as "financing provided under a federal, state or local program a principal purpose of which is to provide subsidized financing for projects designed to conserve or produce energy." Consumers who receive other incentives are advised to consult with a tax professional regarding how to calculate this federal tax credit. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. Expenditures include labor costs for the onsite preparation, assembly or original installation of the system and for piping or wiring to interconnect the system to the dwelling. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is on a new home, the "placed in service" date is the date of occupancy by the homeowner.