New Federal Tax Credit
Incentives for Renewables
The American Recovery and Reinvestment Act of 2009, has
removed the maximum credit amount for all eligible technologies (except fuel
cells) placed in service after 2008. Prior to Dec 31 2008, the maximum
credit was capped at $2000.
A taxpayer may now claim a credit of 30% of qualified expenditures for a
system that serves a dwelling unit located in the U.S. that is used as a
residence by the taxpayer. 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. Expenditures include labor costs for onsite preparation,
assembly, or original system installation and for piping or wiring to
interconnect a system to the home. If the federal tax credit exceeds tax
liability, the excess amount may be carried forward to the succeeding
taxable year. The maximum allowable credit, equipment requirements, and
other details vary by technology as outlined below.
Solar Power (Photovoltaic) Systems
The new solar tax credit provisions now extends the
30-percent tax credit for 8 years for both residential and commercial solar
installations. It eliminates the $2,000 monetary cap for residential solar
electric and solar hot water installations, creating a true 30-percent
credit and allows the credit to be carried forward for one year.
The new tax provision also extends the credit to
off-grid system owners and allows Alternative Minimum Tax (AMT)
filers, both businesses and families, to take the credit.
Coupled with state and local incentives, many solar customers in the
US can now get 50-80% of a system cost covered by
incentives/rebates/credits. (The new stimulus bill is
supposed to allow you to get a check instead of a tax credit but this has
yet to be implemented.)
Of course, it is impossible to predict
the future cost of electricity but many homeowners are seeing return
on investments in a solar PV system within 7-15 years.
The life of the photovoltaic system is typically estimated to be
30-50 years, with inverter replacement occurring after 15 years.
Most PV systems will repay the original investment several times over
the life of the system depending on state, local, and utility incentives and
electrical rates.
Note: The Solar Energy Industries
Association (SEIA) has a useful frequently asked questions document
regarding the federal solar energy incentives on their website
here.
Solar Hot Water Heating Units
There is no maximum credit for systems placed in service after 2008. (The
maximum credit is $2,000 for systems placed in service before January 1,
2009.) To qualify, the systems must be placed in service from January 1,
2006, through December 31, 2016, and the 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. In addition, 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.
The home served by the system does not have to be the taxpayer’s principal
residence.
Small Wind-Energy Property
There is no maximum credit for systems placed in service after 2008. (The
maximum credit is $500 per half kilowatt, not to exceed $4,000, for systems
placed in service in 2008.) Systems must be placed in service from January 1, 2008, through December
31, 2016. The home served by the system does not have to be the taxpayer’s principal
residence.
For further information on the federal tax incentives and credits for
residences, see the
DSIRE database.
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