Renewable Energy Tax Incentives
The renewable energy tax incentive, which includes solar, wind and geothermal, provides an excellent opportunity to go alternative at this time. The Federal government provides a tax credit equal to 30% of the cost of the system, while state and local governments along with utilities can also provide additional incentives. Take the state of California for example, where incentives from the California Solar Initiative currently cover approximately 20% of the installed cost of a photovoltaic ( PV) system for a homeowner. Installing a photovoltaic ( PV) system will help reduce, or completely eliminate, your electric bill. Incentive levels decrease over time, so now is a good time to go solar. Contact your tax preparer for the details.
Residential Renewable Energy Tax Credits
Consumers who install solar energy systems (including solar water heating and solar electric systems), small wind systems, geothermal heat pumps, and residential fuel cell and microturbine systems can receive a 30% tax credit(1) for systems placed in service before December 31, 2016; the previous tax credit cap no longer applies.
(1) A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the tax that is owed. Consumers can itemize purchases on their federal income tax form, which will lower the total amount of tax they owe the government.
Incentive Type: Personal Tax Credit
IRS Form 5695 & Instructions: Residential Energy Credits
Eligible Renewable/Other Technologies: Solar Water Heat, Photovoltaics, Wind, Fuel Cells, Geothermal Heat Pumps, Other Solar Electric Technologies
Applicable Sectors: Residential
Amount: 30%
Maximum Incentive:
Solar-electric systems placed in service before 2009: $2,000
Solar-electric systems placed in service after 2008: no maximum
Solar water heaters placed in service before 2009: $2,000
Solar water heaters placed in service after 2008: no maximum
Wind turbines placed in service in 2008: $4,000
Wind turbines placed in service after 2008: no maximum
Geothermal heat pumps placed in service in 2008: $2,000
Geothermal heat pumps placed in service after 2008: no maximum
Fuel cells: $500 per 0.5 kW
Carryover Provisions: Excess credit may be carried forward to succeeding tax year
Eligible System Size: Fuel cells: 0.5 kW minimum
Equipment/Installation Requirements: Solar water heating property must be certified by SRCC or by comparable entity endorsed by the state in which the system is installed. At least half the energy used to heat the dwelling’s water must be from solar. Geothermal heat pumps must meet federal Energy Star requirements. Fuel cells must have electricity-only generation efficiency greater than 30%.
To learn more about state, local, utility, and federal tax incentives and policies avialable for Renewable Energy & Energy Efficiency, checkout the “Database of State Incentives for Renewables & Efficiency” (DISIRE), which is a comprehensive source for this type of information. Acknowledgement is also given to the U.S. Department of Energy, for this information.