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Greenbelt Solar - Federal Residential Renewable Energy Tax Credit
Federal Residential Renewable Energy Tax Credit explained.

Information accurate as of: 01/01/2011

Incentive Type: Personal Tax Credit

Eligible Renewable/Other Technologies: Solar Water Heat, Photovoltaics, Wind, Fuel Cells, Geothermal Heat Pumps, Other Solar Electric Technologies

Applicable Sectors: Residential

Amount: 30% of the total cost of installation.

Example: If the total cost of your solar installation is $20,000, then the applicable tax credit would be 30% of that amount; e.g. - $6000, so the cost of your solar installation would not be $20k in the end but $14k. Add to federal tax credit your utility rebates on top of it and solar has never been more affordable!

Maximum Incentive:

  • 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

    Eligible System Size: Fuel cells: 0.5 kW minimum

    Equipment Requirements: Solar water heating property must be certified by SRCC or a comparable entity endorsed by the state where 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 criteria. Fuel cells must have electricity-only generation efficiency greater than 30%.

    Carryover Provisions: Excess credit generally may be carried forward to next tax year

    Start Date: 1/1/2006

    Expiration Date: 12/31/2016

    Web Site: www.energystar.gov/taxcredits

    How to claim the tax credit: IRS Form 5695 & Instructions: Residential Energy Credits

    Note: The American Recovery and Reinvestment Act of 2009 does not allow taxpayers eligible for the residential renewable energy tax credit to receive a U.S. Treasury Department grant instead of taking this 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) 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. The credit was further enhanced in February 2009 by The American Recovery and Reinvestment Act of 2009 (H.R. 1: Div. B, Sec. 1122, p. 46), which removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after 2008.

    A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States and 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 at a new home, the "placed in service" date is the date of occupancy by the homeowner.

    Expenditures include labor costs for on-site 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 excess credit may be carried forward until 2016, but it is unclear whether the unused tax credit can be carried forward after then. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.

    Solar-electric property

    • 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.
    • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
    • The home served by the system does not have to be the taxpayer’s principal residence.

    Solar water-heating property

    • 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.
    • Systems must be placed in service on or after January 1, 2006, and on or before 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.
    • The home served by the system does not have to be the taxpayer’s principal residence.

    Fuel cell property

    • The maximum credit is $500 per half kilowatt (kW).
    • Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
    • The fuel cell must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.
    • In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per 0.5 kW. 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 must 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 0.5 kW, not to exceed $4,000, for systems placed in service in 2008.
    • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
    • The home served by the system does not have to be the taxpayer’s principal residence.

    Geothermal heat pumps

    • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service in 2008.
    • Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
    • The geothermal heat pump must meet federal Energy Star criteria.
    • The home served by the system does not have to be the taxpayer’s principal residence.

    Significantly, The American Recovery and Reinvestment Act of 2009 repealed a previous limitation on the use of the credit for eligible projects also supported by "subsidized energy financing." For projects placed in service after December 31, 2008, this limitation no longer applies.

    History

    The federal 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 and a 30% tax credit (up to $500 per 0.5 kW) for fuel cells. Initially scheduled to expire at the end of 2007, the tax credits were extended through December 31, 2008, by the Tax Relief and Health Care Act of 2006.

    In October 2008, the Energy Improvement and Extension Act of 2008 extended the tax credits once again (until December 31, 2016), and a new tax credit for small wind-energy systems and geothermal heat pump systems was created. In February 2009, The American Recovery and Reinvestment Act of 2009 removed the maximum credit amount for all eligible technologies (except fuel cells) placed in service after December 31, 2008.

    Contact:
    Public Information - IRS
    U.S. Internal Revenue Service
    1111 Constitution Avenue, N.W.
    Washington, DC 20224
    Phone: (800) 829-1040
    Web Site: http://www.irs.gov

    Disclaimer: The information presented on the Greenbelt Solar web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.
    While the Greenbelt Solar strives to provide the best information possible, the Greenbelt Solar makes no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The Greenbelt Solar disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on www.greenbeltsolar.com; www.solar512.com and www.austinsolarcompany.com web pages.

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