Residential Renewable Energy Tax Credit
Established by the Energy Policy Act of 2005, the federal tax credit for residential energy property initially applied to solar electric systems, solar water heating systems and fuel cells. The Energy Improvement and Extension Act of 2008 (H.R. 1424, Division B) extended the tax credit to small wind energy systems and geothermal heat pumps, effective January 1, 2008. Other key revisions included an eight-year extension of the credit to December 31, 2016, the ability to take the credit against the alternative minimum tax, and the removal of the $2,000 credit limit for solar electric systems beginning in 2009.
Incentive Amount: 30%
Solar water heating property. Learn more at DSIRE.org.
- Systems must be placed in service from January 1, 2006, through December 31, 2016.
- Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
- At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating property expenditures to be eligible.
- The tax credit does not apply to solar water heating property for swimming pools or hot tubs.
- In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $6,667. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs he or she paid.
- The home served by the system does not have to be the taxpayer’s principal residence.
U.S. Department of Treasury – Renewable Energy Grants
The American Recovery and Reinvestment Act of 2009 (H.R. 1), enacted in February 2009, created a renewable energy grant program that will be administered by the U.S. Department of Treasury. This cash grant may be taken in lieu of the federal business energy investment tax credit (ITC). Solar. The grant is equal to 30% of the basis of the property for solar energy. Eligible solar-energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat. Passive solar systems and solar pool-heating systems are not eligible. Hybrid solar-lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible. Learn more at DSIRE.org
Business Energy Investment Tax Credit (ITC)
The federal business energy investment tax credit was expanded significantly by the Energy Improvement and Extension Act of 2008 (H.R. 1424), enacted in October 2008. This law extended the duration — by eight years — of the existing credits for solar energy, fuel cells and microturbines; increased the credit amount for fuel cells; established new credits for small wind-energy systems, geothermal heat pumps, and combined heat and power (CHP) systems. For solar systems, the credit is equal to 30% of expenditures, with no maximum credit. The approved equipment is the same as the Renewable Energy Grant program mentioned above. Learn more at DSRIE.org
- Solar-electric systems placed in service before 1/1/2009: $2,000
- Solar-electric systems placed in service after 12/31/2008: no maximum
- Solar water heaters placed in service before 1/1/2009: $2,000
- Solar water heaters placed in service after 12/31/2008: no maximum
- Wind turbines placed in service in 2008: $4,000
- Wind turbines placed in service after 12/31/2008: no maximum
- Geothermal heat pumps placed in service in 2008: $2,000
- Geothermal heat pumps placed in service after 12/31/2008: no maximum
- Fuel cells: $500 per 0.5 kW
Additional Resources for Solar Incentives